NEWS & ADVICE : EDUCATION LOANS
Inflation pauses at 12.14 percent
By Neelima Shankar
Sep 29, 2008
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The country's inflation rate for the week ended September 13 remained unchanged at previous week's level of 12.14%. The slowdown in inflation rate over the past few weeks has been maintained with this figure.

This figure is still far above the central bank's target of 7 percent for the fiscal year to March 31, 2009, but below market expectations. The market claimed that inflation would accelerate to 12.23 percent.

The Finance Ministry said prices of 30 essential items declined during the week to 7.58 percent, compared to 7.72 percent in the previous week. Prices of cereals, pulses, sugar and edible oils declined on a week-to-week basis while the price index for fuel, power, light and lubricants segment remained unchanged.

The finance ministry, in a press release, said "while overall inflation is higher in the current year, inflation for primary articles is lower compared to the rates in 2007-08."

The wholesale price index (WPI)-based inflation has stabilized on a year-on-year basis but it remains well above the 3.5 percent for the corresponding week last year. On an annual basis, inflation in manufactured goods declined to 10.61 percent from 10.78 percent in previous weeks, while it increased in the primary articles group by 29 basis points to 11.56 percent.

The government's chief statistician, Pronab Sen, forecast "inflation will stay in double digits due to the (low) base effect till January before easing. The inflation we're seeing is the second-round effect of oil and steel (prices)."

"On a month-on-month basis, inflation rate has come down", he added.

Inflation has nearly tripled from a year ago and is now at its highest levels since the current inflation series began being compiled 13 years ago.

This inflation figure may still demand aggressive monetary tightening by the central bank but analysts sounded divided on whether RBI would go for a hike in policy rates in its monetary review on October 24. RBI governor D. Subbarao is likely to hold interest rates stable and shift the focus from inflation to growth in the mid-term policy review.

The provisional wholesale price index for the week ending July 19, 2008 has been revised up to 12.54% from 11.98% earlier.


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