Inflation up at -1.53% , food prices increase

After falling for three weeks in a row, the inflation rate rose to -1.53 per cent for the week ended August 8, primarily due to dearer primary articles, especially food items.

The inflation rate for the previous week ended August 1 was -1.74 per cent and stood at 12.82 per cent during the corresponding period in 2008.

The consumer price index for agricultural and rural labourers also rose to 12.90 per cent and 12.67 per cent respectively for July, 2009 from 11.52 per cent and 11.26 per cent in June 2009.

“Food prices are putting pressure on the index as the index continues to be in the negative due to high base effect. Commodity prices will continue to be firm and we are expecting the point-to-point inflation rate at 7.5 per cent by the end of the fiscal,” said Jyotinder Kaur, economist with HDFC Bank.

The Reserve Bank of India (RBI) has projected the point-to-point inflation rate to be around 5 per cent by the end of the current financial year.

As the inflation rate continues to be in the negative territory, a neutral monetary policy stance is expected to continue till December.

“The credit situation is still non-inflationary, we expect credit growth to pick up by December and then RBI will have to initiate its rollback policy and increase policy rates,” added Kaur.

The inflation rate of primary articles rose on an annual basis by 63 basis points to 5.94 per cent, while the prices of fuel also declined marginally by 3 basis points to -11.09 per cent.