Inflation slips to 0.13%, 30-yr low

Inflation slips to 0.13%, 30-yr low
Times of India, June 12, 2009, Page 23

Prabhakar Sinha TNN, New Delhi

Inflation dipped to 0.13% for the week-ended May 30, the lowest level in the last three decades, government data showed on Thursday. In next week, inflation is expected to become negative. In the previous week, the annual inflation was 0.48%.

Despite inflation set to go into negative territory, Prime Minister's Economy Advisory Council chairman Suresh Tendulkar ruled out any possibility of deflation. However, economists feel that inflation will remain in the negative territory for around two months. ‘‘We expect a spell of negative year-on-year inflation for two to four months from June 6, 2008,'' said consulting firm Edelweiss in a report.

Inflation is hovering at less than 1% level since March 7. It was expected to fall below zero earlier but because of the sharp rise in the food article prices, it continued to hover around 0.5% for the last three weeks. During the same period last year, because of spurt in the prices of commodities and food articles, annual inflation at the double-digit level. Inthe week ended May 31, 2008 inflation was ruling at 9.32%.

As the annual inflation is measured against the prevailing wholesale price index (WPI) of the corresponding week last year, the sudden spurt in the price rise in the week ended June 7, 2008 made the WPI index rose by 1.8% to 236.5 from 232.3 in the previous week. But, in 2009, the WPI index is witnessing an average weekly rise of (- 0.01%) to 0.6%. In the week ended May 30, 2009, WPI was at 232.6. Even if the index rises by 1% during the week ended June 6, 2009, inflation will become negative.

In the week ended May 30, inflation fell to 0.13%, despite the rise in food articles prices. The prices of eggs increased by 11%, mutton by 3% and fruit and vegetables and spices by 2% each. The prices of ghee rose by 4% and Khandsari by 2%. But the prices of industrial products continue to fall. Prices of textile items, metal products and plastic items and machinery fell during the week.

Such a steep fall in inflation may prompt the banks to cut interest rates. There is an expectation that banks may cut prime lending rate by 50 basis points in the next couple of weeks. Edelweiss said that the lowest point of WPI inflation could be around (-2%).

Oil boils to $72 on recovery hope

Singapore: Oil prices climbed above $72 a barrel on Thursday in Asia as investor optimism about a global economic recovery pushed crude to fresh highs for the year.

Benchmark crude for July delivery rose was up 72 cents at $72.05 by early afternoon Singapore time in electronic trading on the New York Mercantile Exchange. On Wednesday, it rose $1.32 to settle at $71.33.

Oil has jumped from below $35 a barrel in March on expectations the worst of a severe US recession was over. Traders are now beginning to price in a recovery by the end of the year and improving crude demand, analysts said. AP