New Delhi: Led by fall in prices of pulses and some food articles, inflation rate has declined to a five-year low of 3.26% for the week ended 29 September, compared to 3.42% the previous week.
The fall in inflation rate coupled with rise in industrial production by 10.75 in August, have fuelled expectations that Reserve Bank of India could reduce interest rates in its half-yearly monetary review on 30 October.
“Fall in inflation rate is a very encouraging development. Now we can safely call for reduction in interest rate to bring about a multiplier effect on growth and employment,” Ficci secretary general Amit Mitra said.
The annual rate of inflation stood at 5.41% a year-ago.
However, bankers are doubtful RBI will soften its stand on interest rates due to inflow of forex, which has crossed $16 billion so far in 2007, and high global crude prices.
The prices of pulses like moong and urad declined by 1% during the week besides tea prices, which declined by 4% and edible oils (0.1%) also helped to bring down the inflation rate.
The prices of vegetables, however, rose by 0.6%, and fruit and milk prices remained unchanged during the week.
The index of fuel, power, light and lubricants which have weight of 14.23% in WPI remained unaltered at its previous week’s level of 322.
Manufactured products, which have a weight of 63.75% in WPI, rose marginally by 0.1% during the week.