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Economic slowdown drags inflation near a three-decade low

Economic slowdown drags inflation near a three-decade low
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First Published: Fri, May 08 2009. 10 15 PM IST

Updated: Fri, May 08 2009. 10 15 PM IST
New Delhi: India’s inflation held near a three-decade low as the weakest economic growth in six years kept the cost of food and manufactured products under check.
Also See Deflation Ahead? (Graphic)
Wholesale prices rose 0.7% in the week ended 25 April from a year earlier after gaining 0.57% in the previous week, the government said in New Delhi on Friday. Economists expected a 0.63% gain.
Wholesale prices could turn negative for a few weeks in the coming months, though that doesn’t mean the country is in the grip of deflation, the Reserve Bank of India (RBI) had said in April.
RBI governor D. Subbarao may be near the end of his cycle of growth-supporting rate reductions as he expects inflation to climb to 4% over the next year.
The central bank may take an extended pause on rates until the end of 2009, said Prasanna Ananthasubramaniam, a Mumbai-based analyst at ICICI Securities Ltd. The bank has cut rates significantly since October to spur consumer demand.
The monetary easing combined with tax cuts and government spending provide a stimulus of at least $85 billion (around Rs4.2 trillion), or 7% of the gross domestic product, according to RBI estimates. That may help economic growth recover to 6% in the year that started on 1 April, from 5.3% in the quarter ended 31 December, Subbarao had said on 21 April.
Consumer prices paid by industrial workers rose 9.63% in February from a year earlier, after gaining 10.45% in the previous month, according to government data. Consumer price inflation for farm workers was 10.79%. The government hasn’t yet released the data for March.
The commerce ministry on Friday revised the wholesale inflation rate for the week ended 28 February to 2.47% from 2.43%.
Graphic by Ahmed Raza Khan / Mint
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First Published: Fri, May 08 2009. 10 15 PM IST