Thursday, November 13, 2008

Inflation falls to 8.98% for week ended November 1

India's wholesale price index rose 8.98% in the 12 months to November 1, sharply below the previous week's annual rise of 10.72
percent, government data showed on Thursday. Inflation slipped to single digit after 21 weeks.

Earlier a Reuters poll showed that the inflation rate was expected to have eased to around 10.4 per cent in early November. The median forecast of 11 economists was for a 10.37 per cent rise in the wholesale price index in the 12 months to November 1, compared with 10.72 per cent a week earlier.

Inflation, which was 9.32 per cent on May 31, had surged into double digits in the first week of June after a hike in retail fuel prices.

Last week's marginal increase in the wholesale price index (WPI)-based inflation was mainly due to upward movement of prices in primary articles, which has a weightage of 22% in the index.

Despite the marginal increase, however, economists expect the downward movement in inflation to continue. Their expectations are rooted in the prices of primary articles dropping after kharif produce enters the market. They also do not expect the liquidity infusion and the cut in interest rates to have any impact on inflation in short term.

"Inflation is expected to come down further due to the lower fuel and steel prices, largely all commodity prices were lower in that week," said Anjali Verma, economist with MF Global.

Data released on Wednesday showed industrial production recovered in September from its slowest pace in a decade as consumers spent for the festival season. But analysts said the rebound would be short-lived after the global credit crisis turned on India in October, paralysing money markets and pushing up firms' borrowing costs.

Industrial production rose 4.8 per cent in September from a year earlier, well above August's 1.4 per cent.

In early August, the inflation rate had hit 12.91 per cent, the highest reading since annual numbers in the current data series became available in April 1995.

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