Inflation plummets to 0.44%

The annual Wholesale Price Index-based inflation inched closer to zero in the first week of March, setting the stage for the Reserve Bank of India to cut interest rates further to prop up growth.

Despite the decline in the headline inflation estimate to a three-decade low of 0.44 per cent, food products inflation continues to rule high and hurt at the consumer-level. The latest Consumer Price Index for Industrial Workers, to be released on Friday, is expected to be around 10.4 per cent.

According to data released by the Ministry of Commerce and Industry here on Thursday, the annual WPI inflation rose 0.44 per cent for the week ended March 7, sharply lower than the previous week’s annual rise of 2.43 per cent. Inflation was recorded at 7.78 per cent a year ago and the sharp dip in the latest reported week has been partially attributed to the base effect coming into play.

The drop of 199 basis points in the latest WPI inflation estimate is the steepest since the week ended November 1, 2008. There is no record of inflation dipping this low since 1977-78, according to Government estimates.

The sharp fall in headline inflation during the latest reported week was on account of an across-the-board dip in inflation levels. In primary articles, the year-on-year inflation dipped to 4.4 per cent for the latest reported week, against 5.8 per cent the previous week. In food articles, inflation fell to 7.4 per cent after being stable at 8.3 per cent in the previous two weeks. Cereals, pulses, salt, milk and sugar, however, clocked high relatively year-on-year inflation rates.

In the fuel and power group, inflation dipped further to clock minus 6 per cent versus minus 5.1 per cent in the earlier week. In manufactured products, inflation rate decreased to 1.3 per cent in the current week, from 4 per cent last week. Inflation in most sub-groups declined or remained steady relative to rates recorded in the previous week.