Inflation rises to 0.7%

The inflation rate, measured by the wholesale price index (WPI), marginally rose to 0.7 per cent for the week ended April 25 from 0.57 per cent for the previous week.

It was 8.27 per cent for the corresponding week in 2008. The rise is primarily a result of an increase in prices of manufactured products.

Experts had expected the inflation rate to touch the negative territory in the first week of May 2009. However, the constant pressure from food articles, both in the primary articles and manufactured products category, has kept the inflation rate high.

“I still maintain that the inflation rate will go into the negative territory in the first half of the year itself owing to high base effect. High minimum support prices and lower production are resulting in the rise of prices of food items,” said DK Joshi, an economist with CRISIL India Ltd, a rating and research agency. With inflation remaining firm, economists say India’s central bank would wait for GDP numbers for the fourth quarter (January- March 2009) before taking any decision.

“Currently, interest rate cuts would not depend on the WPI but will largely depend on the growth figures. I don’t see a scope for Reserve Bank of India (RBI) rate cuts as the rise in prices indicate demand is healthy,” said Sumita Kale, economist with Indicus Analytics, a Delhi-based economic research institution.

The RBI has only recently cut the repo rate, the rate at which the central bank lends to banks, by 0.25 basis points to bring it down to 4.75 per cent. Since September last year, the RBI has reduced this key interest rate by 4.25 percentage points.

Prices of commonly consumed articles like cereals, pulses, vegetables and sugar continued to be on the rise. The inflation rates of pulses and cereals, are at 14.3 per cent and 11.02 per cent from previous week year-on year figures of 12.62 per cent and 10.29 per cent respectively. The inflation rate of vegetables also saw a rise of around 3 percentage points to 14.6 per cent from previous week’s figure of 9.92 per cent.

Manufactured products saw a 0.3 per cent rise in inflation rate from previous week, and stood at 1.04 per cent. Primary articles saw a 0.2 per cent rise at 5.97 per cent from 5.68 per cent in the previous week.

Sugar prices also continued to rise as the inflation rate increased to 24.66 per cent from 22.49 per cent in the previous week. The final rate of inflation for the week ended February 28, 2009 was revised marginally to 2.47 per cent from 2.43 per cent, an earlier provisional estimate.