The Hindu Business Line : Inflation rate drops on cheaper manufactured items, fuel

New Delhi May 18 The annual Wholesale Price Index-based inflation rose 5.44 per cent during the week ended May 5, lower than the previous week's annual rise of 5.66 per cent, the Ministry of Commerce and Industry said in its weekly report.

Fruits, eggs dearer

The year-on-year inflation rate dipped below the 5.5 per cent for the first time in nearly four months, with the 22 basis points fall during the latest reported week mainly on account of lower prices in the manufactured products and the fuels group.

The primary articles' group, however, showed a surge, with fruits and vegetables, eggs, meat and fish turning dearer.

During the latest reported week, the Wholesale Price Index rose 0.2 per cent to 211.4 points from 210.9 points the preceding week. It was measured at 4.37 per cent during the corresponding week a year ago.

Annual inflation had been running above 6 per cent for most of this year. It hit a high of 6.70 per cent in early 2007, its highest levels in over two years.

Inflation started cooling off from the middle of April and has come down subsequently by 65 basis points in a span of just three weeks; from 6.09 per cent on April 14 to 5.44 per cent on May 5.

Fall and rise

During the latest reported week, inflation in manufactured goods came down to 5.15 per cent from 5.51 per cent during the preceding week.

While inflation in manufactured food products, textiles, paper and paper products, leather and leather products, base metals, alloy and metal products and transport equipments witnessed a fall during the course of the week, items such as beverages, tobacco and tobacco products, wood and wood products, rubber and plastic products, chemicals, non-metallic minerals and machinery and machine tools showed an increase in prices during the week.

However, the net effect was a 36 basis points fall in inflation in manufactured products.

RBI Target

Inflation in the fuel group declined further to 0.66 per cent during the week ended May 5, from 1.01 per cent in the preceding week.

According to the Centre for Monitoring Indian Economy (CMIE), this is the lowest inflation in the fuel group since February 6, 1999.

Inflation in the primary articles showed an upsurge and increased to 11.08 per cent during the latest reported week, from an increase of 10.84 per cent during the preceding week.

Among the primary articles' group, the food articles, particularly, fruits and vegetables, eggs, meat and fish, became dearer during the week.

The RBI has a target of containing inflation at close to 5 per cent during 2007-08. According to CMIE, though inflation is currently ruling well above the RBI's target, it is expected to come down a bit in the near future because of the high base effect.

WPI Figures

The RBI had resorted to raising its key lending rate five times in less than a year to fight price pressures.

Though it left rates unchanged at a review last month, the central bank had said it could act immediately if necessary.

The Government also revised the WPI figures for the week ended March 10 to 209.4 points compared with the provisional figure of 209.3 points, while the revised inflation stood at 6.51 per cent compared with the provisional figure of 6.46 per cent.