Inflation declines to 8.84%; rate cuts in offing

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New Delhi, Nov 27 (UNI) The headline inflation rate declined for the third successive week to a six-month low of 8.84 per cent for the week ended November 15, compared to 8.90 per cent in the previous week, providing space for further rate cuts by Central Bank to boost growth and shore up investors' confidence, who got futher hit by the terrorist attacks in the financial capital.

For the third week in a row, the inflation continues to be in single digit with the decline moderating further to 6 basis points as compared to 8 basis point last week and 174 basis points witnessed in the week ending November 1, 2008, a Finance Ministry statement said.

Primary articles covering food, non-food and minerals (having a weight of 22.03 per cent in the WPI basket), accounted for nearly 31 per cent of inflation, the major contributor being food articles.

While fuel and power (with a weight of 14.23 per cent) contributed 19 per cent to the inflation rate, the manufactured products (with a weight of 63.75) accounted for 50 per cent of the inflation.

Within manufactured products, the non-food contributed more than 44 per cent to the overall inflation.

The index for the 'Primary Articles' group rose by 0.1 per cent from the previous week.

Out of a total of 98 articles, 21 articles have shown a decline in prices in the current week as compared to November 8, 2008.

These included among others, fish-marine, sapota, brinjal, peas (green), cashewnuts, ginger dry, raw rubber, tapioca, gram, cotton seed, tea, groundnut seed, , raw cotton, turmeric, potatoes, raw silk coconut and some spices.

A total of 55 articles have shown no increase in prices.

However, there was an increase in inflation rate for 20 items, which included tomatoes, soyabean, papaya, cabbage, some pulses and a few cereals.

The index for 'Fuel, Power, Light and Lubricants' group remained unchanged at its previous week.

Prices of all 19 commodities reported in this group remained same over the previous week.

In the case of 'Manufactured Products' group, the index rose by 0.05 per cent from the previous week.

Out of 318 commodities in this group, 276 have shown no increase in prices over the last week.

For 21 commodities, there has been a decline in prices. These commodities included among others, ferro silicon, steel ingots, PVC fittings&accessories, basic and foundary pig iron, cotton oil seeds, vitamin liquids, imported edible oil, rice bran oil, zinc, synthetic yarn, gur, groundnut cake, steel sheets, plates and strips, groundnut oil and sugar.

However, a total 21 products, particularly acetylene, bran, cotton yarn-cones, gingelly oil witnessed an increase in prices.

Inflation of 30 essential commodities increased by 40 basis points to 8.00 per cent as of the week ending November 15, 2008 from 7.60 per cent reported in the earlier week.

There was an increase in the prices of primary essential commodities including pulses such as urad, masoor, moog, arhar and cereals like wheat, rice, bajara and atta.

There was also an increase in the prices of onions. The prices of other essential commodities moderated or declined over previous week, the statement said.

The monthly deseasonalised inflation rate has been negative during September and October, suggesting a continuing moderation in WPI inflation in the coming months.

For the month of October 2008, the deseasonalised inflation for primary food showed some increase, though there was significant decline in inflation rate of manufactured food.

The overall monthly deseasonalised inflation in manufactured products shows a continuing decline since September 2008.

Experts believe that this easing of inflation from August's peak of 12.91 per cent will pay way for the Reserve Bank of India to further cut rates to propel the growth in the sluggish economy.

Earlier, the central bank had taken a slew of measures including cutting the key lending rate by 150 basis points to 7.5 per cent and lowering cash reserve ratio to improve liquidity.

The yesterday's terrorist attacks in the Mumbai's business district has further pushed down the confidence of investors.

As many as 101 people, including six foreigners and 14 policemen, including the head of anti-terrorism unit, have been killed in the attacks.

The commandos are still battling to free hostages held by gunmen at two luxury hotels in Mumbai.

Militants armed with grenades and rifles stormed into the Taj Mahal Palace and Tower hotel and the Trident Oberoi complex late yesterday.

The stock, bond, currency and money markets were closed today as the government ordered residents of Mumbai to stay at home.

The country economy may slow to 7.5 per cent in the year ending March 31 after expanding 9 per cent or more annually in the previous three years.

Experts believe that the central bank now will further go for key rate cuts to infuse liquidity in the market to boost growth and lift the confidence investors.


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