Inflation slips to 2.43%, experts predict deflation

The Wholesale Price Index (WPI)-based inflation rate expanded the least in more than six years, as manufactured products like textiles, machinery as well as metals and alloys became cheaper.

Economists expect the decline in the inflation rate to continue in the coming weeks, and forecast that the country could see deflation — decrease in the general price levels — by the beginning of April this year.

According to data released by the Department of Industrial Policy and Promotion today, the annual rate of inflation stood at 2.43 per cent for the week ended February 28, against 3.03 per cent in the previous week. It was 6.21 per cent in the corresponding week a year ago.

The rapid fall in annual inflation rate has been attributed to the higher base seen in the corresponding week of 2008. “The inflation rate is lower mainly due to the high statistical base, the actual index has risen week on week. But inflation will continue to fall at a rapid pace. By March-end, we expect inflation to be between 1.5 and 2 per cent,” said Rupa Rege Nitsure, chief economist, Bank of Baroda.

The inflation rate has been falling at a steady pace, after peaking at 12.83 per cent for the week ended August 16, 2008, mainly due to declining commodity prices.

However, on a week-on-week basis, the WPI rose marginally by 0.04 per cent, due to increase in prices of certain articles, including food products like fruit and vegetables, condiments and spices as well as some processed food items.

In ‘Primary articles’, inflation decreased marginally to 5.8 per cent in the current week against 6 per cent in the previous week. Inflation rate for the fuel group dipped to 5.1 per cent for the week under consideration, compared with 4 per cent contraction in the week earlier mainly on account of a fall in prices of non-administered fuels

Manufactured products, which constitute 64 per cent of the index, fell to 3.96 per cent as compared with 4.5 per cent in the previous week.

Economists projected that India could see deflation in the coming months, making further room for key policy rate cuts by the Reserve Bank of India.