Inflation at 0.18%

Headline inflation rate declined marginally to 0.18 per cent for the week ended April 4 this year, mainly because of a drop in prices of manufactured products.

The inflation rate, as measured by the wholesale price index (WPI), was 0.26 per cent last week and 7.71 per cent during the corresponding week in 2008.

Experts continue to maintain that inflation would fall below the zero rate, defined as deflation, in two to five weeks time. This historic low number, according to them, provides an opportunity for the Reserve Bank of India (RBI) to reduce key interest rates further.

Since September 2008, the RBI had reduced repo rate — the rate at which it lends to banks — by 4 percentage points to 5 per cent. Similarly, reverse repo rate — the rate it gives banks for parking their funds — to 3.5 per cent, the same rate a savings account would earn.

Common man yet to benefit from low inflation

There is no relief for the common man, as prices of commonly consumed primary articles have increased. For example, the price of vegetables grew by 24 per cent. Inflation rates of cereals and pulses, which figure among the basic consumption basket, increased by around 1 percentage point each to 9.45 per cent and 9.12 per cent, respectively.

Sugar inflation rate stood at 18 per cent, against 14.52 in the previous week. The inflation rate of fuel also increased to -5.8 per cent from the previous week’s figure of -6.11 per cent.

However, the rate of inflation for manufactured products was estimated at 0.75 per cent, against 1.42 per cent in the previous week.

The headline inflation rate as measured by the WPI has been hovering around the zero rate since March this year.

The rate would have dipped by 0.2 per cent had the index number stayed at the previous week’s level. “Inflation would have dropped below zero, had it not been for the increase in the price of vegetables and other food articles like pulses,” said DK Joshi, an economist with Crisil India, a ratings and research agency.

The final inflation rate for the week ended February 7, 2009, was revised downwards to 3.69 per cent, against an earlier provisional estimate of 3.92 per cent.