Inflation dips a tad to 11.8% as prices fall

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New Delhi, Oct 10: Holding out some hope for the UPA government at a time when most economic indicators are turning bleaker by the day, inflation dipped to 11.8% for the week ended September 27.

It is partially lower than the 11.99% clocked a week before but continues to be much higher than the 3.36% in the same period a year ago. This is the second week in a row when inflation has been below 12%.

Analysts said that a fall in inflation may give the Reserve Bank of India some leeway and it could cut repo rate by 25 basis point in its mid-term review later this month.

“The figures are much on expected lines. Inflation is going to come down,” Omkar Goswami chairman CERG Advisory said.

But DK Srivastav director Madras School of Economics said, “We will have to wait for a while to see a major decline in inflation. The decline this week must be due to certain seasonal aspects like rates of manufactured goods.”

He cautioned that there may be another spurt in prices, with Deepavali around the corner when there will be a lot of buying.

The fall in inflation has been mainly on account of lower prices of 17 of the 98 primary articles, including bajra, maize, masur, raw wool and cotton, tomatoes. In fact in the ‘primary articles’ group, annual inflation declined to 11.17%, as compared to 11.29% reported last week.

“Average 52-week inflation for the three broad groups of commodities indicate that while overall inflation is higher in the current year, inflation for primary articles is lower compared to the rates in 2007-08,” the finance ministry pointed out.

But inflation of 30 essential commodities marginally increased to 7.74% for the week from 7.7% in the preceding week, which is also mirrored in retail prices.

In fact retail prices of essential commodities including milk, rice, imported edible oils and tur also increased.

On the rising prices of commodities and agri products, Goswami said, “Don't look at individual items. Look at the overall prices.”