Slash in petro prices may curb inflation, says Chidambaram

New Delhi, Nov 29 | Updated: Nov 30 2006, 07:08am hrs
The drop in petrol and diesel prices is likely to help ease inflation, Upnion finance minister P Chidambaram said here on Wednesday.

However, he pointed out that inflation, at present, is being driven by increase in prices of primary product, which comprise two categoriesfood articles and non-food articles weighing 22.02% in the wholesale price index (WPI).

While petrol and diesel constitute part of Fuel, Power, Light and Lubricants category, with a weight of 14.23%, manufactured products have 63.75% weight in WPI.

The government announced a reduction of Rs 2 per litre for petrol while Re 1 for diesel from midnight on Wednesday.

Reacting to the move, he said, It should help in easing inflation to some extent, but it is mostly driven by primary products.

Inflation, which touched 5.30% during the early part of November, declined marginally to touch 5.29% during the week that ended on November 11, was mainly due to the prices in wheat and pulses. In the corresponding period in the previous fiscal, inflation was 4.09%.

It may be noted that the Reserve Bank of India has projected inflation between 5-5.5% this fiscal.