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Inflation falls to 3.23% for week ended 15 Sept

Inflation falls to 3.23% for week ended 15 Sept
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First Published: Fri, Sep 28 2007. 03 49 PM IST
Updated: Fri, Sep 28 2007. 03 49 PM IST
PTI
New Delhi: A fall in some food and manufactured items pulled down inflation to a new five-year low of 3.23% for the week ended 15 September, but analysts said the RBI is unlikely to cut interest rates at its policy review next month.
The inflation rate, based on wholesale prices, declined as fruits, sugar, egg, fish meat, and a few manufactured items became cheaper. The rate stood at 3.32% in the previous week and 5.27% in the corresponding week a year ago, according to official figures released today.
“Inflation is likely to remain around 3.5% till December despite concerns of excessive rainfall in some parts of the country affecting kharif production, and high crude oil prices,” HDFC Bank chief economist Abheek Barua said.
He said the Reserve Bank, which will announce monetary policy review on October 30, is likely to keep a neutral stance as far as interest rates were concerned but may raise cash reserve ratio. “Anything at this stage is unwarranted.”
Crisil principal economist D K Joshi also said RBI may not touch key interest rates. The policy would be dictated by IIP data of August and September and fuel prices.
The government has not allowed state-run firms to raise fuel prices inspite of record high crude oil prices in the international markets due to political opposition.
Only yesterday (27 September), Finance Minister P Chidambaram cautioned that rising prices of food and oil in global markets could lead to an increase in domestic rates and impact the economy.
According to official figures, prices of items like paints have gone up by 6% during a week with the onset of festival season. Prices of cotton seed oil (4%), poultry chicken (5%), mutton (2%) also rose.
The fuel, power, light and lubricants group, which has 14.23% weight in the price index, rose by 0.1% as furnace oil became costlier by 2%.
Manufactured products, which have 63.75% weight in the price index, remained unchanged during the week.
Coconut oil became cheaper by 4%, while zinc prices softened by 10% and aluminium by 3.3%.
However, prices of cement moved up by 0.2% during the week. Other items like steel furniture and hydraulic pump also became dearer.
Inflation for the week ended 21 July figure was revised to 4.65% against the provisional figure of 4.36% as the wholesale price index stood at 213.7 points compared to the provisional estimate of 213.1 points.
Barua said flow of foreign funds, mainly in the stock markets could marginally impact prices, for which RBI would have to intervene to mop up liquidity by selling additional government bonds.
The government is expected to raise Rs59,000 crore in the second half of the current fiscal.
After the US Federal Reserve’s 0.5% cut in interest rate early this month, foreign institutional investors have heavily invested in the stock market. FIIs have pumped in over two billion dollars in the stock market after the Fed rate cut, taking their total exposure to India to more than $11 billion this year.
RBI governor Y V Reddy has maintained that Fed rate cut would provide valuable inputs when it will review its half-yearly monetary policy on 30 October.
Some bankers are expecting RBI could announce marginal cut in interest rate to maintain the growth momentum, although the central bank has previously said it would maintain a tight vigil on prices.
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First Published: Fri, Sep 28 2007. 03 49 PM IST