Wholesale Inflation at all time low of 0.44 percent

Inflation for the week ended March 7 fell to an all time low of 0.44%. The sharp fall in inflation was due to several factors including easing prices of food articles and fuel items along with a high base effect. Annual inflation as measured by Wholesale Price Index (WPI) was at 2.42% in the week before and at 7.78% in the corresponding week last year.

The inflation for food articles eased considerably to 7.34%. It had touched a 10-year high of 11.64% in the beginning of the year. Prices of food articles for the week ended March 7 touched the lowest since the beginning of the year.

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The sharp fall in annual inflation as measured by fuel index was due to fall in prices of jet fuel and electricity for agriculture each of which fell by 8%. The fuel prices are currently witnessing negative inflation to the range of 6% and are expected to dip further into negative territory.

The higher base effect along with low demand in the economy is expected to keep inflation in negative territory for 5 to 6 months." Inflation will turn negative starting from April and will remain so until the end of 2009," said Tushar Poddar, an economist with Goldman Sachs Inc. in Mumbai. "We expect the Reserve Bank to ease liquidity" to support growth. The International Monetary Fund (IMF) said this week India should rely more on monetary policy to support the economy as high public debt makes fiscal efforts difficult.

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Retail inflation as measured by the consumer price index for industrial workers has moved up to 10.45% in January, the highest since December 1998. The consumer-price index for farm workers increased 11.62% in January from a year earlier, following an 11.14% in December. The central bank said this month consumer prices will decline after a lag, without specifying a time frame.

The commerce ministry today revised the rate for the week to Jan. 10 to 5.46 percent from 5.60%.

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