Inflation has further declined to 8.90 per cent for the week ended November 8 from 8.98 per cent a week ago, a development that may prompt the Reserve Bank to inject more liquidity into the system to overcome the cash crunch.
The inflation, measured by movement in wholesale prices, has come down by 0.08 percentage points mainly on account of declining prices of fuel items, triggered by fall in international crude prices.
While the prices of light diesel oil (LDO) dipped sharply by 11 per cent during the week, in case of furnace oil and aviation fuel they came down by nine per cent and five per cent, respectively.
The inflation rate was 3.20 per cent a year ago.
The index of fuel, power, light and lubricants declined by 0.9 percentage points during the week under review.
Prices of naphtha, which is an important industrial fuel, were down by four per cent.
The prices of crude in the international market came down to USD 52.82 per barrel, down from a high of about USD 147 a barrel in July.
In the primary articles category, the prices of jowar, tea and maize too came down marginally during the week under review.
Food, fruits and vegetables, however, became dearer in the wholesale market. According to the inflation data, the fruits and vegetables prices were up by 0.3 per cent and 2.6 per cent, respectively, while food index rose by 0.01 per cent.
Some pulses such as masoor and arhar, too, became expensive during the week.
The inflation for the week ended September 13, 2008, was revised to 12.42 per cent from provisional estimate of 12.14 per cent.
RBI has, since October, reduced the mandatory deposit that banks keep with the central bank (Cash Reserve Ratio) by 350 basis points to 5.5 per cent, the deposit that banks park in government securities (Statutory Liquidity Ratio) by 100 basis points and short-term (repo) lending rates by 150 basis points to signal softer interest rate regime.
Over all RBI has unlocked about Rs 2,75,000 crore of banking funds to ease the liquidity crunch.
The industry chambers as well as the banks have also been pitching for more measures to ease the cash-strapped system, which has started hitting the real economy, especially the real estate and automobile sectors.