Date:03/11/2007 URL: http://www.thehindu.com/2007/11/03/stories/2007110355711500.htm

Business

Inflation rate declines to 3.02 p.c.

Special Correspondent

FM attributes the drop to steps taken on the monetary front

High oil prices
loom large
Narrow changes in price movements

NEW DELHI: The inflation rate slumped to a new five-year low at 3.02 per cent for the week ended October 20 from 3.07 per cent in the previous week.

At this level, the inflation rate is only a wee bit higher than the target of three per cent set by the Reserve Bank of India for the medium term.

Despite the higher base effect, the sharp drop in the inflation rate can be gauged from the fact that it was 5.61 per cent in the same week a year ago.

While the RBI hiked the cash reserve ratio (CRR) by 0.5 percentage point on October 30 as a precautionary measure to suck out excess liquidity, Finance Minister P. Chidambaram on Friday attributed the drop in the inflation rate to steps taken on the monetary front and noted that the Government would continue to monitor the price situation. “Inflation is down because we have taken steps on [the] monetary side. We will continue to watch inflation,” he told newspersons here.

Even as the inflation rate based on the wholesale price index (WPI) is down to its five-year low of 3.02 per cent for the week ended October 20, Mr Chidambaram pointed out that the consumer price index-based inflation was also down by 80 basis points in September over the previous month.

The point-to-point rate of inflation, based on the CPI, decreased from 7.26 per cent in August to 6.40 per cent in September, he said. Although the inflation rate has dropped, the RBI has warned that the spiralling international oil prices could push it up.

In fact, on Thursday, as crude oil prices peaked to over $90 a barrel, Petroleum Minister Murli Deora met Mr Chidambaram to devise ways of addressing the issue and cushion its impact on the margins of domestic oil companies. To a query on global oil prices, the Finance Minister refused comment saying “I have no comments on [the] oil issue.”

During the week ended October 20, prices of various products moved in a narrow range.

In fact, the price index inched up in most groups, implying thereby that prices did move up, but at a slower pace. Food articles such as maize, arhar, masur and wheat turned dearer.