RTTNews - India's inflation rate for the week ended June 6 entered into negative territory for the first time since December 1978 at 1.61%, compared to the previous week's rise of 0.13%, giving ample scope for the government to allot more funds in the next month's Budget to boost economic growth. The figure was 11.66% for the corresponding week of the preceding year, say data released Thursday by the Ministry of Commerce and Industry.
Going by the provisional figures, the wholesale price index or WPI for all-commodities rose by 0.04% to 232.7 from 232.6 for the preceding week.
Inflation, based on the wholesale price index, plunged--due to lower prices of fruits and vegetables, gram, bitumen, as also some manufactured products covered under all-category groups.
The final estimate of inflation for the week ended April 11 was enhanced to 0.96% from the earlier provisional figure of 0.26%.
The drop in prices of fruits and vegetables, fish-marine, copra, urad, gram, castorseed, raw silk, as also groundnut seed resulted in fall in the rate of the main index for primary articles by 0.7%. However, those of soyabean, arhar, jowar, eggs, masur, maize, ragi, raw rubber and gingelly seed moved up.
The index representing fuel, power, light and lubricants rose by 0.7% due to higher prices of furnace oil, naphtha, as also light diesel oil. However, the price of bitumen declined.
The index of Manufactured Products rose by 0.1%, due to higher prices of salt, tractor tyres, motor tires,giant tyres, lead ingots, polyester staple fibre, foundry pig iron, as also basic pig iron, while those of steel ingots, imported edible oil, steel sheets, plates and strips, as also zing ingots dropped.
As per Reserve Bank of India, inflation's fall into negative territory has only a statistical significance and wholesale-price gains will accelerate to 4% by March 2010.
Sonal Varma, Economist IN Nomura said, The only significance is that this is the first negative WPI reading in the history of the series. The high base effect will keep the WPI inflation in the negative zone for at least three months. The inflation momentum has been picking, up and a continued rise in commodity prices will exert upward pressure on input costs. With consumer prices still high and signs of the economy stabilizing, we judge that the rate-cutting cycle is over.
On the other hand, Shubhada Rao, Chief Economist, Yes Bank, said, It was a widely anticipated phenomenon. I can attribute this to largely a statistical base. I anticipate the trend to continue for the next couple of weeks. However, inflation pressures are expected to gradually build up towards the third and fourth quarters of this fiscal, and expect the inflation to exceed 5.5% by this fiscal year-end.
The Congress party-led UPA government will present its budget early next month and its focus is expected to be on spurring growth even at the risk of a wider fiscal deficit.
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