By IANS,
New Delhi : Maintaining a downward trend for the third week in a row, India’s inflation rate moderated to 12.1 percent for the week ended August 30, as compared to 12.34 percent for the week before.
The official wholesale price index (WPI), or the index to calculate inflation, released by ministry of commerce and industry Thursday, however, showed an increase of 0.3 percent in the price index for primary articles.
The index for food articles such as fruits and vegetables rose by 0.2 percent, while that of minerals by 1.4 percent “due to higher prices of iron ore (2 percent)”.
The index for manufactured products like sugar, oil cakes, mixed fabrics, and acid rose by 0.3 percent, the ministry said.
“The annual rate of inflation, calculated on a point-to point basis, stood at 12.1 percent (provisional) for the week ended August 30,” the ministry said in a statement.
The annual rate of inflation was only 3.72 percent on September 1, 2007.
“Nineteen primary articles like rice, maize, onions, pulses and potatoes showed a decline in prices while there was no increase in the prices of another 61 primary articles,” a finance ministry statement said soon after the data was released.
The government, however, chose to maintain “a wait and watch” approach till inflation starts moderating faster.
“It is moderating at a slower but steady pace. It is a healthy sign,” a senior official in the Planning Commission, who did not wish to be identified, told IANS.
“It is a short-term phenomenon, and will hopefully continue to moderate,” said the official.
“I am reasonably confident that within a year (that is 12 months) inflation will be back to normal levels, namely 5 to 6 percent,” Arvind Virmani, chief economic adviser, finance ministry, had told IANS last week.
Moderation in inflation comes as a big solace to the government and policy makers, who had predicted softening in inflationary trends in view of a good monsoon and the monetary measures taken by Indian central bank the Reserve Bank of India (RBI).
“The annual rate of inflation further moderated to 12.1 percent as compared to 12.34 percent reported a week earlier, and 12.63 percent for the week ending August 9,” the ministry added.
The final index for the week ended July 5 stood at 239.3 as compared to 238.7 (provisional) and the annual rate of inflation based on final index, calculated on point-to point basis stood at 12.19 percent as compared to 11.91 percent (provisional).
RBI Governor D. Subbarao had Sept 9 spoken about the need to “contain inflation to sustain growth”.
He had termed the current bout of inflation the result of “a combination of supply side and demand side factors.”
Prime Minister Manmohan Singh’s Economic Advisory Economic Council (EAC) in the “Economic Outlook Report 2008” has said: “Co-ordinated policy action can bring inflation down to 8-9 percent by March 2009.”
EAC has projected that the Indian economy despite high inflationary trends would be able to log 7.7 percent growth rate in the current fiscal against 9 percent in 2007-08.
The Indian economy grew at 7.9 percent in April-June this fiscal as compared to 9.2 percent during the corresponding period of last year to confirm that Asia’s third largest economy, after China and Japan, was being affected by the global economic slowdown.
To rein in inflation, RBI July 29 had raised the repo rate, or the rate at which the central bank lends money to other banks, by 50 basis points to 9 percent and cash reserve ratio or the minimum balance a bank has to keep as reserve by 25 basis points to 9 percent.