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| Inflation falls to 0.27%, set to hit zero |
| BS Reporter / New Delhi/Hyderabad Mar 27, 2009, 00:48 IST |
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 India is not heading for deflation, says Montek.
Headline inflation continued its journey towards zero rate, but the prices of items used by the common man like sugar, pulses and cereals continued to remain high.
The annual inflation rate, as measured by the wholesale price index (WPI), fell to 0.27 per cent for the week ended March 14 this year, compared with 8.02 per cent in the corresponding week last year. It was 0.44 per cent in the previous week.
With inflation near zero, there is a consensus that it would soon fall into negative territory because of “the base effect”. This, according to experts, provides an opportunity to the Reserve Bank of India (RBI) to cut key interest rates.
“As long as the CPI (Consumer Price Index) remains high, it is wrong to say inflationary concerns are over for India,” said Rupa Rege Nitsure, chief economist with Bank of Baroda. “The CPI is showing some stickiness and should gradually start declining in a month’s time, but not at the same pace as the wholesale price index.”
Even as WPI-based inflation has dropped sharply from near 13 per cent level in August 2008, various CPI-based inflation is still at double digit-level. For example, CPI inflation rate for both agricultural workers and rural labourers were at 10.79 per cent in February 2009, compared with around 6.2 per cent in year-ago month.
Pulses, cereals and sugar still rule high: Though the overall food inflation is coming down on a week-on-week basis, it is still at 7.11 per cent for the week ended March 14, 2009.
Pulses and cereals, the two most commonly consumed items, are at 9.97 per cent and 10.12 per cent, respectively. The inflation rate for sugar is at 20.97 per cent.
Group-wise, both primary articles and manufactured products, which together have more than 80 per cent weight in the index, showed week-on-week increase indicating that inflation rate has come down mainly due to “base effect” rather than fall in overall prices.
“The base year effect will go away by May and June and thereafter we should see positive inflation that may, however, continue to be subdued for some time in light of recessionary trends the world over,” said Saumitra Chaudhuri, member of Prime Minister’s Economic Advisory Council.
According to Planning Commission Deputy Chairman Montek Singh Ahluwalia, the inflation rate might touch zero or perhaps go into negative figures for a couple of weeks but would not persist for long.
“India is not heading for deflation. Negative growth is not unusual and we have seen in it for some time in 1970. Deflation would result only if the negative growth is seen over a sustained period of time,” Ahluwalia said.
The inflation rate for primary articles was at 3.94 per cent, compared with 4.38 per cent in the previous week. For manufactured products it was 1.17 per cent, against negative 0.75 per cent in the week ended March 7, 2009. But fuel group remained in the negative territory at -6.06 per cent.
The final estimate for the week ended January 17 this year has been revised downwards to 4.95 per cent, against initial number of 5.64 per cent.
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