India’s inflation falls again, to 0.26 percent (Lead)

April 9th, 2009 - 4:36 pm ICT by IANS  

New Delhi, April 9 (IANS) India’s annual rate of inflation fell marginally to 0.26 percent for the week ended March 28, from 0.31 percent the week before, official data showed Thursday.
The inflation had declined for eight consecutive weeks to 0.27 percent for the week ended March 14, but rose marginally to 0.31 percent for the week ended March 21.

Between March 21-28, the index remained unchanged at its previous week’s level of 227.3 (provisional), data released by the commerce and industry ministry showed.

Among the three main commodity groups, the index for manufactured products rose 0.2 percent, while that for primary articles declined 0.3 percent.

The index for fuel, power, light and lubricants remained unchanged at its previous week’s level of 320.9 (provisional).

Economists, who have already warned of a deflation in the Indian economy, say lower inflation rate does not necessarily mean that prices have fallen. Lower inflation rate only means the rate of rise in prices has come down, not the actual prices.

Deflation is a decline in the general price level. It is caused by factors such as low money supply and credit, and a curb in spending by households, industry or government. The lower demand during deflation often leads to a rise in unemployment.

Sri Ram Khanna, the commerce department head at Delhi School of Economics here, said lowering inflation was a sign of recovery from the slowdown.

“There has been bumper production of wheat this year. We heard that there is no space to store grains. These are signs of recovery and the economy would witness it from September onwards,” said Khanna.

He, however, remained apprehensive about the revival of exports.

“Exports are dependent on the external factor. But you will see over one-and-a-half lakh bookings for the Nano car. So practically it’s an indication that we are already moving out of the slowdown,” Khanna said.

According to Dalip Kumar, the head of projects at the National Council of Applied Economic Research (NCAER), a Delhi-based think tank, it is the wholesale inflation which has come down.

“Retail prices continue to rise at much higher levels. So, consumers are yet to reap the benefit of lower inflation,” he pointed out.

Kumar further remarked that despite slower rise in the wholesale price index, consumers have not really benefited. “We have excellent production of food grains. But the cost of food commodities and fruits have gone up,” he Kumar.

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