Inflation below 11%, falls for five weeks in a row

The wholesale price index (WPI)-based inflation stood at 10.68 per cent for the week ended October 18, as compared with 11.07 per cent for the previous week. The annual rate of inflation was 3.11 per cent in the corresponding period a year ago.

This is the fifth consecutive week inflation rate has declined after reaching its peak of 12.63 per cent a couple of months back. The three commodity groups — primary articles, fuel and manufactured products — have shown a decline in inflation rate on an annual basis.

The drop in inflation comes after the Reserve Bank of India (RBI) announced a surprise one percentage point cut in repo rate — the rate at which RBI lends to commercial banks. This was seen by economists as a sign of RBI shifting its focus from bringing down inflation to promoting growth.

RBI, in its mid-term review released last week, said it expected inflation to slow down to 7 per cent by the end of this financial year. However, average WPI inflation rate in the current fiscal so far is still high at 10.95 per cent — way above the central bank’s comfortable rate of 5 per cent.

The average inflation rate is still reigning high as headline inflation stayed above 11 per cent for most of the weeks in the current fiscal and also due to higher revision of final inflation numbers. For example, the final figure for the week ended September 5 was 42 basis points higher than the provisional number.

For the week ended October 18, inflation rate for primary articles group declined to 10.92 per cent in the reporting week as against 11.53 per cent a week-ago, because of lower prices of wheat and arhar and urad.

However, the index for food articles rose by 0.2 per cent on for the week ended October 18, because of higher prices of bajra, maize, jowar and fruit and vegetables.

The index for manufactured products, which has more than 63 per cent weight in the WPI, declined by 0.1 per cent in the reported week. Lower prices of imported edible oil, oilcakes, rice bran oil, gingelly oil and groundnut oil contributed to the fall in index number for this group.

Meanwhile, inflation for the week ended September 5 was revised upwards to 12.76 per cent as against an earlier provisional rate of 12.34 per cent.