Inflation further eases to touch 4 per cent mark

NEW DELHI: Inflation declined to around 14-month low of 4.03 per cent for the week ended June 16, as essential food items and some manufactured products turned cheaper, easing pressure on RBI to further increase interest rates.

The wholesale prices-based inflation rate fell for the 10th consecutive week from the previous week level of 4.28 per cent.

Inflation also fell due to some base effect as it stood at high of 5.5 per cent during the corresponding week last year.

Earlier in the week, Finance Minister P Chidambaram had said in London that central bank tight monetary policy and rupee appreciation had helped to moderate inflation and more rate rises may not be needed if the trend continues.

Analysts said as inflation is closely moving to the level the Reserve Bank had targeted for the medium term, it would prompt the central bank not to resort to further tightening of its monetary stance.

Noted economist Abheek Barua, who will join HDFC Bank as senior vice-president treasury next week, said RBI's stance would shift from hawkish to neutral in its upcoming monetary policy review, slated for July 31.

"All the major rates are likely to remain stable," he added.

RBI had targeted inflation to remain close to five per cent this fiscal and 4-4.5 per cent in the medium term.

Among major food items, pulses became cheaper by 0.2 per cent because of improvement in their supply. The state-owned trading firms have contracted 10.38 lakh tonnes of pulses for imports till June 25 in the current fiscal.

Of this, 1.87 lakh tonnes have arrived in the country.

However, prices of some pulses like masur rose by two per cent.

Prices of vegetables declined by 2.4 per cent and those of fruits by 0.3 per cent. However, analysts said prices would in fact rise in the coming weeks as supply is disrupted due to rains.

Eggs, meat and fish turned cheaper by 0.8 per cent. However, prices of rice moved up by one per cent.

Prices of food products in manufactured category also declined. Imported edible oil turned less expensive by five per cent, gur, sugar and khandsari fell by two per cent each and rice bran oil and gingelly oil by one per cent each.

However, prices of coconut oil moved up by one per cent.

Among other manufactured products, prices of some chemicals like calcium ammonium nitrate declined (five per cent), so did prices of certain textiles like hessian cloth (3 per cent), metals like basic pig iron and foundry pig iron (3 per cent each).

However, prices of cement rose by 0.5 per cent. In an interview in London earlier this week, Chidambaram had stated that there is no price control on cement, but the Government did try to influence producers to moderate prices in the public interest.

Prices of certain vehicles like auto-rickshaws rose (by six per cent) and motorcycles (by one per cent).

Prices of fuel, power, light and lubricants minerals oil and electricity remained unchanged.

Wholesale Price Index, on which inflation data is based, declined by 0.05 per cent to 211.7 points during the week from 211.8 points a week ago.

Inflation for the week ended April 21 has been revised to 6.07 per cent against 5.77 per cent estimated provisionally as the wholesale price index finally stood at 211.5 points against 210.0 points estimated earlier.