Inflation dipped to one-year low level
By Vaibhav Aggarwal
Feb 13, 2009
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The wholesale price index based inflation has dropped close to the Reserve Bank of India's ‘comfort level' of between 3% and 4%. For the week ended January 31st, inflation hit a one-year low level of 4.39% from 5.07% in the previous week.

The cooling inflation is likely to bring the interest rates further down. Interest rates in India are still high and have to be brought down, said Commerce Minister, Kamal Nath.

He added that there is a need to lower the borrowing costs for industry and exporters. "Cost of money to the exporters has to be at global parity, which it is not at this moment," said the minister.

The fall in inflation during the week was mainly attributed to a 3.1% reduction in the fuel index that resulted in a 21% decline in the prices of lignite, 11% in petrol, 8% in cooking gas and 7% in high speed diesel. The primary article index fell by 0.2% and that for manufacturing recorded a fall of 0.1%.

The annual inflation rate was 4.74% during the corresponding week, a year ago.

The inflation rate in this fiscal has dived from a 13 year high of 12.91% in August 2008 because a fall in prices of oil and other commodities. The global recession has also prompted the inflation to decline.

The Reserve Bank of India has been constantly taking measures to ease the inflation rate in the country. Since October RBI has cut the CRR to 5% while the repo and reverse has been slashed to 5.5% and 4% respectively.

However the economic growth in the country is expected to slow to 7.1% in the current fiscal year.


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