Inflation Continues Downtrend, Touches 3.2 Per Cent

The decline in inflation continued unabated for the fourth week in succession, with the annual rate declining to 3.20 per cent for the week ended November 8.

During the week, inflation based on the wholesale price index (WPI), fell by 0.03 percentage points to 3.20 per cent compared with 3.23 per cent last week and 6.47 per cent during the corresponding week last year.

The index for all commodities (base 1981-82=100) declined by 0.1 per cent to 329.3 (provisional) from 329.6 (p) the week before.

Inflation has slumped by about one percentage point in the last four weeks alone. Economist have suggested that the persistent fall, despite recent hikes in prices of petroleum products and rail freight charges, may be due to the slackening of demand in the economy.

Though analysts have suggested an upturn in inflation in the second half of the year, signs of any northward movement in inflation is yet to be sighted.

Meanwhile, inflation based on the final index declined by 0.1 percentage points to 3.9 per cent for the week ending September 13 from 4.0 per cent in the previous week.

The slackening of demand is quite evident in the fact that if it was not for the increase in prices of commodities, which are under administered price mechanism (APM), annual inflation would have plunged further.

Wherever, the prices are determined by the markets, it has remained subdued, while prices of commodities under APM have shot up as in the case of fuel, power, light and lubricants (fpll).

During the year, the prices of primary articles and manufactured products increased by just 1.68 per cent and 2.56 per cent respectively compared with 11.09 per cent increase in fpll.

The increase in the index of fpll is mainly due to the hikes in administered prices of items like petroleum products and power during the year.

Research body National Council for Applied Economic Research is predicting a pick up in inflation in the second half of the current fiscal.

NCAER has projected an average seven per cent inflation in the second half and an overall average of six per cent for 1997-98 as the economy picks up.

While ICICI Securities Finance (I-Sec) has predicted the inflation to rise to five per cent by next may due to the widening of the fiscal deficit and a revival in industrial demand.

During the week under reference, the index for primary articles rose by 0.1 per cent, while indices for fpll and manufactured products rose by 0.3 per cent and 0.1 per cent respectively.

The commodities which have seen major fluctuations during the week were: bus chassis (up 19 per cent), coir fibre and spun pipes (up 10 per cent each), indigenous petroleum crude (up 9 per cent) bajra (up 8 per cent), skelps (up 7 per cent) and malted food (up 5 per cent), electric motors phase three (down 9 per cent), maize starch and zinc (down 8 per cent each), foundry pig iron (down 7 per cent), soyabean and basic pig iron (down 6 per cent each) and urad and polyster staple fibre (down 5 per cent each).

During the reference week, the index for primary articles rose by 0.1 per cent to 338.7 from 338.4 on account of a sharp rise in minerals group.

The index for food articles went down by 0.3 per cent to 383.6 from 384.8 due to fall in prices of urad (-5 per cent), ragi (-4 per cent), maize and fruits and vegetables (-2 per cent each) and rice and pork (-1 per cent each). However, during the week prices of bajra (8 per cent), fish (4 per cent), jowar (2 per cent) and moong and tea (1 per cent each), firmed up from the sub-group.

The index for non-food articles declined by 0.2 per cent to 343.5 from 344.3 following decline in prices of soyabean (-6 per cent), sunflower (-4 per cent), raw rubber (-3 per cent) and groundnut seed and gingelly seed (-1 per cent each) compared to the previous week prices of coir fibre (10 per cent), copra (3 per cent) and raw jute (1 per cent), however, went up during the week.

The index for minerals went up by a massive 5.2 per cent to 166.9 from 158.7 due to the prices of indigenous petroleum crude (9 per cent) shooting up. From the sub-group, prices of steatite (-5 per cent) went down. The index for fpll declined by 0.3 per cent to 369.6 from 370.7 for the last week due to lower prices of high speed diesel oil (2 per cent).