Inflation slips to 8.84%
India’s inflation, as measured by wholesale price index (WPI), stood at 8.84 per cent for the week ended November 15 this year, as compared to 8.9 per cent in the previous week. Inflation was at 3.35 per cent during the corresponding week of last year.
The index number for two categories, primary articles and manufactured goods, increased on a week-on-week basis, reflecting general increase in price levels. However, index number for the fuel group remained unchanged between November 1 and 15, though crude oil prices continued to fall in this period.
“Given the severity of global commodity prices going down, we may reach Reserve Bank of India's (RBI) comfort zone by March 2009,” said D K Joshi, economist with Crisil, a ratings and analysis firm.
RBI has predicted inflation rate to come down to 7 per cent by end of this fiscal, but its comfort zone is around 5 per cent level.
The annual rate of inflation for food articles went up by 62 basis points (one basis point is one-hundredth of a percentage point) to 9.93 per cent for the week ended November 15, 2008, as compared to 9.31 per cent in the previous week.
However, Surjit S. Bhalla, managing director of Oxus Research and Investments, a Delhi-based economic research firm said: “Inflation is not a problem. The government should cut the key interest rates.” He estimates annualized inflation in the last five months- removing seasonal factors- have come down to 1.5 per cent.
In response to global financial crisis impacting India, the central bank responded by cutting repo rates (the rate at which RBI lends to commercial banks) to 7.5 per cent, cash reserve ratio (CRR) (the money banks are required to keep with RBI) to 5.5 per cent. Despite reducing the key rates, industry lobby groups are demanding even more cuts to boost the demand in the economy.
The final inflation estimate for the week ended August 20 this year has been revised upwards by 14 bps to 12.13 per cent, as compared to the provisional estimate of 11.99 per cent released two months back.
The annual rate of inflation for ‘food articles’ stood at 9.93 per cent for the reported week, as against 9.31 in the previous week, due to increase in prices of moong, rice, bajra, soyabean and castor seed.