India’s inflation rate slowed in the third week of April as prices of lentils, oil seeds, tea and coffee declined, easing pressure on the central bank to add to five rate increases in the past year.
The key wholesale price inflation rate was 5.77% in the week ended 21 April, down from 6.09% in the previous week, the commerce ministry said on 4 May 2007. Analysts had forecast inflation at 5.86%.
Finance minister P. Chidambaram on 3 May reduced some duties in his final budget proposals to help cut prices from a near two-year high. Reserve Bank of India governor Y.V. Reddy may rely on the delayed effect of raising borrowing costs to a five-year high to rein in inflation. “The monetary measures taken by the Reserve Bank of India will take time to filter through the system,” Chidambaram told Parliament. “Monetary measures are already having an effect and will have an effect”, in curbing prices, he added.
The yield on the benchmark 8.07% note due January 2017 rose 1 basis point this week to 8.15% as of 12:58pm in Mumbai, according to the central bank’s trading system. The price, which moves inversely to the yield, fell 0.03, or 3paise per Rs100 face value, to 99.43.
The index of manufactured products, which contributes 63.75% of the wholesale price index’s weight, declined by 0.1% in the week.
Chidambaram on Thursday scrapped plans to raise taxes on higher priced cement by as much as 50% and instead levied a 12% tax on sales of the building material. The revised tax on cement and a reduction of some nickel and iron ore duties were among the changes in the budget.