Inflation slips to over six-year-low of 2.43%

Inflation fell for the sixth consecutive week, to 2.43 per cent, the lowest in over six years, as prices of food items like pulses, dairy products and edible oil softened further in the last week of February.

Even the prices of manufactured items, including iron and steel, textiles, chemicals and batteries, declined during the week ended February 28.

Wholesale prices-based inflation is now at a level seen in June 2002, by falling 0.6 percentage points from 3.03 per cent a week ago. It was 6.21 per cent during the corresponding week a year ago.

Terming the decline below 3 per cent on expected lines, economists expect inflation to reach zero in the next couple of months.

"This is on expected lines. It was during last February and March that inflation spiked. The prices of commodities, primarily oil and foodgrains, have moderated," said Chief Statistician of India Pronab Sen.

According to ICRIER Director Rajiv Kumar, "It is no surprise. In fact, we should now begin to start worrying about deflation. We could see zero inflation in 2-3 months."

During the week, the prices of maize, arhar and moong declined by one per cent each. Dairy products fell by about 2 per cent while edible oil also fell by about one per cent.

Among manufactured products, prices of textile items like nylon filament yarn declined by two per cent while sacking bags fell by one per cent. At the same time, steel ingots were cheaper by as much as 13 per cent and batteries prices softened by three per cent.

The fuel index remained unchanged at its previous week's level of 323.5.

During the week, prices of fruit and vegetables and bajra were expensive by two per cent each while bakery products and masur prices firmed up by one per cent each.

Elsewhere, cement and some inorganic chemicals prices also firmed up.

The declining inflation has also raised hopes of further cuts in the benchmark rates by the Reserve Bank to spur the economy as industrial production declined for the second month in a row to 0.5 per cent in January 2009.

Crisil Principal Economist D K Joshi said, "I believe there could be a cut of 50 basis points in both the repo and reverse repo rates next month."

Last week, the RBI slashed the short-term lending and borrowing rates -- the repo and reverse repo -- by 50 basis points to arrest economic slowdown with India's GDP growth falling to over a five-year low of 5.3 per cent in Q3.

Inflation for the week ended January 3, 2009, was revised upward to 5.33 per cent from 5.24 per cent in the provisional estimates.