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Inflation rate for the week ended April 18 this fiscal has gone up and this is due to rise in prices of primary articles, especially food items.
For the above mentioned period, the wholesale price index (WPI)-based inflation rate increased by 0.57 per cent as against 0.26 per cent in the previous week. The inflation rate was 8.23 per cent in the corresponding week in 2008.
Experts has originally predicted that inflation rate will be negative by the end of this month, however they are now rethinking due to rise in prices especially in the category of primary articles for two consecutive weeks.
According to the chief economist with HDFC Bank Abheek Barua, “We expected the rise of primary articles to be a result of temporary supply shock, but the index points to a deeper demand-supply mismatch”.
The prices of commonly consumed articles like cereals, pulses and sugar continue to be high. The inflation rate of pulses saw a year-on-year rise of nearly 4 percentage points to 12.6 per cent. As far as food and cereals are concerned, it continues to remain around 10 per cent.
The inflation rate for primary and manufactured articles stood at 5.7 per cent and 0.94 per cent, respectively, compared with 4.4 per cent and 0.90 per cent in the previous week. Fuel prices have also recorded a rise of around 0.1 per cent on a week on week basis.
As regards further rate cuts, analysts are of the say that with prices remaining firm and early signs of global economy recovering, any further rate cuts are limited.
Shubhada Rao, chief economist at YES Bank in Mumbai said, “This data support our view that we are very close to the end of the rate cutting cycle and we may see a maximum of 25-30 basis points cuts from present levels, as the economy starts to recover in the second half.”
The Reserve Bank of India (RBI) has only recently cut the repo rate, the rate at which lends to banks, by 0.25 basis points to bring it down to 4.75 per cent. Since September last year, India’s central bank had reduced this key interest rate by 4.25 percentage points.
As per an earlier provisional estimate, the final rate of inflation for the week ended February 21, 2009, was revised down from 3.03 per cent to 2.99 per cent. Business Standard
May 1, 2009
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