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India's inflation rate for the week ended August 29 remained in the negative territory for the thirteenth week in a row at minus 0.12%, compared to the previous week's negative level of 0.21%. The rate turned negative for the week ended June 6 for the first time since the new wholesale price index or WPI series started in 1995.
The annual rate of inflation was 12.38% for the corresponding week of the preceding year, say data released Thursday by the Ministry of Commerce and Industry.
Going by the provisional figures, the wholesale price index or WPI for all-commodities rose by 0.2% to 241.1 from 240.7 for the preceding week.
Inflation, based on the WPI, increased, due to higher prices of fruits and vegetables, eggs, edible oils, as also some manufacturing products.
The final estimate of inflation for the week ended July 4 was lowered to minus 0.75% from the previous week's provisional figure of minus 1.21%.
The increase in the prices of eggs, fish-marine, moong, fruits and vegetables, as also milk in the Food Articles group, besides fodder, castor seed, raw rubber and rapeseed and mustard seed in the Non-Food Articles category pushed the growth rate of the main index for Primary Articles to 0.3% from the previous week's level. However, those of linseed, sunflower, niger seed, gingelly seed, masur and its gram declined.
The index representing fuel, power, light and lubricants was unchanged at its previous week's level of 343.3.
The index for Manufactured Products rose by 0.2% due to the higher prices of household laundry soap, synthetic detergent, springs, toilet soap, tooth paste, lead ingots, steel ingots, soyabean oil, aluminium ingots, rice bran oil, ghee as also groundnut oil, while that of ferro-manganese, synthetic resins, salt, sugar, bolts and nuts, as also bicycles dropped.
Nomura, the Japanese think-tank, in a recent statement said India's inflation could rise to 6.5% year-on-year by this fiscal year-end, higher than the Reserve Bank of India's projection of 5%. It also expects the central bank to start hiking its repo and reverse repo rates from January by a cumulative of 125 basis points next year.
RBI, in its annual report for fiscal 2010, said the deficient monsoon might affect the inflation outlook more than growth prospects; as also, prolonged expansionary fiscal and monetary policies threatened to push up prices and eventually crimp growth.
However, Montek Singh Ahluwalia, Deputy Chairman of the Planning Commission, said food prices might ease by end-March, which would help rein in overall inflation within the comfort zone. Presently, inflation based on CPI (Consumer Price Index) is still closer to double-digit zone. However, almost 39% of people expect inflation rate to come below 8% by this month.
India Inc. has anticipated an average inflation rate for consumers at 8.69% by September-end. There are no different views on WPI-led inflation. Though it is in the negative territory for quite sometime now, the average inflation rate is expected to be around 5.63% by September-end, according to the latest survey.
India Inc. is hoping for an improvement in investment climate in the coming months. But whether interest rates continue to soften remains to be seen. However, of late, the increase in prices of commodities--crude oil, metals and food grains--may push rate of inflation beyond RBI's comfort level of 4-5%.
In such a case, aggressive tightening of monetary policy resulting into higher interest rates could not be ruled out. This will throw a spanner in the best of plans of India Inc.
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