Inflation rate moderates further, eases to 10.68 percent (Lead)

October 30th, 2008 - 6:09 pm ICT by IANS  

New Delhi, Oct 30 (IANS) India’s annual rate of inflation eased to 10.68 percent for the week ended Oct 18 from 11.07 percent the week before, prompting economists to predict it would come down to single digit despite the global meltdown.The wholesale price index (WPI) for all commodities released by the ministry of commerce and industry Thursday showed a decline of 0.2 percent, with the index for primary articles like raw rubber and groundnut seed declining 0.3 percent.

“Out of a total of 98 articles, 15 articles have shown a decline in prices in the current week as compared to Oct 11, 2008,” the finance ministry said in a statement.

The index for fuel, power, light and lubricants declined 0.4 percent, while that for manufactured products declined 0.1 percent to 205.4 from 205.7 for the previous week. Both figures are provisional.

“The wholesale price index has been declining for five consecutive weeks,” the ministry said, but conceded that the inflation rate Oct 20 last year was “significantly lower” at 3.11 percent.

The annual rate of inflation based on the final index, calculated on point-to-point basis, stood at 12.76 percent for the week ended Aug 23, up from the provisional 12.34 percent.

“There is a softening in global commodity prices, and there is a decline in price of crude oil, driving inflation down,” said Prime Minister’s Economic Advisory Council (EAC) member G.K. Chadha.

“Inflation is very much on a moderating track and will touch the single digit in the current fiscal,” Chadha, a former vice-chancellor of the Jawaharlal Nehru University (JNU), told IANS.

EAC has forecast an economic growth of 7.7 percent in the current fiscal against an average expansion of 9 percent in the past four years.

Former Reserve Bank of India (RBI) Governor C. Rangarajan, who also chaired the EAC till recently, has forecast the inflation rate to moderate to 10 percent by December.

The finance ministry said seasonal factors have played an important role in fuelling inflation rate, and de-seasonalised index, therefore, is commonly used in assessing price build-up.

“The seasonally adjusted inflation (annualised from month-over-month build-up) during September 2008 is provisionally estimated at (-) 4.6 percent,” the ministry said in its statement.

Said Ila Patnaik, a senior economist with a city-based think tank, the National Institute of Public Finance and Policy: “Seasonally adjusted inflation has come down for the last two months with slowdown in demand all over the world.”

“Moderation in inflationary trends will continue, and will in all probability touch the single digit by the year-end,” Patnaik told IANS.

Double-digit inflation is a cause for concern for the government, which is faced with a sluggish economy, a volatile domestic financial market, and the forthcoming assembly elections in six states.

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