The Hindu : Business : Inflation falls for the third week

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Saturday, Oct 16, 2004

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Inflation falls for the third week

By Our Special Correspondent

NEW DELHI, OCT. 15. With domestic prices of petroleum products remaining static since August, the inflation rate declined for the third week in a row, dropping by 0.18 percentage point to 7.2 per cent for the week ended October 2.

The point-to-point Wholesale Price Index (WPI) inflation fell from 7.38 per cent mainly due to a fall in prices of fuel products and some of the manufactured items, notably edible oils. Inflation stood at 5.32 per cent in the same period a year ago.

Government measures

After touching 8.33 per cent in late August, it dropped to 7.81 per cent in the first week of September. It saw a marginal rise in the following week to 7.87 per cent, but later declined to 7.8 per cent and 7.38 to stand at 7.2 per cent in the latest reported week.

The declining trend in inflation was mainly because of the measures taken by the Government to contain it which had been on the rise since July.

On the fiscal side, the Government cut customs and excise duty on petroleum products, steel and polymers, while on the monetary side, the Reserve Bank of India hiked the cash reserve ratio (CRR) by 0.5 percentage point to 5 per cent in two tranches to suck out over Rs. 8,000 crores of excess liquidity from the market.

Interestingly, fuel prices declined marginally by 0.2 per cent during the week under review, even as global crude oil prices broke many a psychological barrier to cross $55 a barrel due to a host of reasons, including unrest in Nigeria and winter demand in the West.

Vegetable prices up

Amidst this fall in inflation, prices of essential commodities such as vegetables shot up by 14 per cent and there was a marginal to substantial hike in the prices of other food items such as eggs.

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