After a continuous 10-week slide, the rate of inflation has bounced back and jumped to 36 basis points this week in the latest released data. The annual rate of inflation, calculated on point to point basis, reached to 5.60% for week ended Jan 10 as against previous week's data of 5.24% for the week ended Jan 03, 2009. The same was at 4.36% during the corresponding week (Jan 12, 2008) of the previous year.
Releasing the latest Wholesale Price Index (WPI) data, the office of Economic Advisor, Ministry of Corporate Affairs stated that this increment in inflation rate held due to higher prices in food items, vegetables, canned fish, oil cakes, imported edible oil, coconut oil and rice bran oil.
Whilst market analysts believe that it was due to the eight-day long trucker's strike which supplemented the prices of essential commodities in the wake of higher demand and low supply.
Experts, however, add that the jump in inflation is temporary and it would again march southwards as the impact of truck operator's strike would not hurt it further, and the Reserve Bank of India (RBI) can take more strict measures to curb the rising trend.
The RBI may again cut interest rate in its third quarterly review of monetary policy, scheduled on January 27, 2009. In contrast, some experts assume that inflation may ride into negative zone by April to June due to the continuous declination in inflation.
This tendency is called deflation in which the prices of essential commodities decline due to reduction in the supply of money or credit. This is why the inflation rate may cool below 3% - the comfort level of inflation.
The final wholesale price index for ‘All Commodities’ stood at 8.66% as compared to 8.84% (Provisional) reported earlier vide press note dated November 28, 2008, WPI reported.
RBI expects to keep the inflation in the range of 3 to 4% while it may go down to below 2% and cause deflation.
|
|
Comments:
