UPDATE: Inflation rises to -1.21%

Driven by higher prices of fuel items like petrol and diesel, inflation rose marginally to (-)1.21 per cent for the week ended July 4 against (-)1.55 per cent in the previous week.     

At the same time, prices of food articles like cereals, pulses, spices, and fruit and vegetables also remained firm.     

The wholesale price index during the corresponding week a year ago was as high as 12.19 per cent.     

Following the government's decision to raise fuel prices effective July 1, prices of naphtha rose 15 per cent, furnace oil 11 per cent, petrol 10 per cent, high-speed diesel 7 per cent and light diesel oil by 4 per cent.     

Fuel items turned expensive as the government increased prices of petrol and diesel by Rs 4 and Rs 2 per litre, respectively. As a result, the Fuel, Power, Light and Lubricants index increased by 3.1 per cent during the week.     

This is the fifth week in a row when inflation remained in negative territory.     

However, according to analysts, the RBI may not cut benchmark policy rates or reduce the ratios when the central bank reviews the credit policy on July 28.     

The RBI should not cut the repo rate and the cash reserve ratio in July monetary policy, said former RBI Deputy Governor S S Tarapore.

The challenge before the monetary authorities at present is to deal with the fiscal deficit, he added.

During the week, food items like coffee turned expensive 15 per cent, arhar 3 per cent, maize 2 per cent, and condiments and spices by 1 per cent.     

Besides, prices of coffee powder rose 7 per cent, and ghee and sugar one per cent each.     

Year-on-year, the prices of cereals rose about 12 per cent, pulses 17.2 per cent, and fruit and vegetables 11 per cent. At the same time, the prices of milk have gone up nearly 4.8 per cent over last year, while spices were more expensive, by about 6.8 per cent.     

Among manufactured food products, sugar, khandsari and gur went up about 34.5 per cent while processed fish turned dearer by more than 42.7 per cent over the last year.     

Speaking about inflation in the Rajya Sabha yesterday, Finance Minister Pranab Mukherjee said the consumer price inflation is high — even though the wholesale price inflation has turned negative — due to higher food rates.     

There is divergence between the wholesale price index (WPI) and consumer price index (CPI) because the baskets vary for the two, Mukherjee had said.     

During the week, prices of beedi rose 5 per cent, rubber chappal by 11 per cent, benzene by 14 per cent and p.V.C. Resin 4 per cent.