Inflation drops to eight-month low

New Delhi, May 25 | Updated: May 26 2007, 05:30am hrs
Inflation fell to its lowest level in eight months to 5.27% for the week ended May 12, providing a big relief to the central government, which has been battling to curtail inflation. Inflation was 5.44% for the week ended May 5.

Prime minister Manmohan Singh last week had expressed confidence while saying that inflation would come down to 5% in two months. Finance Minister P Chidambaram too had said that prices would moderate further. He also urged the industry on Thursday not to raise prices at will.

The fourth consecutive weekly fall in inflation is likely to ease pressure on the Reserve Bank of India. The central bank is now expected to refrain from any monetary tightening measures as feared in many quarters.

The current fall in inflation has occurred despite an increase in the prices of some essential food items like vegetables, fruits, milk and eggs. While prices of most food products in primary articles category rose, those in manufactured categories declined. The decline has been mainly due to a technical reason, called the Base Year Effect of last year. This is evident from the fact that the Wholesale Price Index, on which inflation data is based, rose by 0.1% to 211.7 points during the week ended May 12 from 211.4 points for the previous week.