RTTNews - India's inflation rate continues to hover around the negative area since June, with the rate for the week ended July 25 standing at 1.58%, compared to the previous week's negative figure of 1.54%.

The annual rate of inflation was 12.53% 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 236.9 from 236.8 for the preceding week.

Inflation, based on the wholesale price index, decreased, though the prices of food items like fruits and vegetables, fish-marine, sugar, as also pulses became dearer.

The final estimate of inflation for the week ended May 30 was raised to 0.90% from the earlier provisional figure of 0.13%.

The increase in the prices of fish-marine, arhar, urad, fruits and vegetables, moong, mutton, wheat, masur as also condiments and spices in the Food Articles category, besides raw silk and raw rubber in the Non-Food Article category kept the rate of the main index for primary articles to grow by 0.4% from the previous week's level. However, those of raw wool, soybean, niger seed as also eggs declined.

The index representing fuel, power, light and lubricants was unchanged at its previous week's level of 338.2 .

The index of Manufactured Products fell by 0.1%, due to the lower prices of synthetic yarn, hessian cloth, oilcakes, texturised yarn and polyester staple fibre, imported edible oil, as also newsprint and white printing paper, while those of cotton yarn-cones, zinc ingots, steel ingots, zinc and lead ingots, cotton yarn-hanks, cottonseed oil, groundnut oil, as also sugar dropped.

The Reserve Bank of India or RBI said negative WPI inflation was expected to persist for some more months until the base effect wore off. The currently-observed negative WPI inflation largely reflected the statistical effect of the high base of last year, and should not be interpreted as structural deflation arising from demand-contraction.

Indranil Pan, Chief Economist, Kotak Mahindra Bank,said: The number has been in line with the expectations. But let us not totally discount the power of WPI. If we consider this as producer prices mainly, it can throw some feedback on the type of price movement that the consumers may be hit with. The CPI might not come down sharply, as food items are creating a problem, and that has a large weightage in the CPI. We might end the year at around 7% inflation with an upward bias of 50-75 basis points on account of food issues.

On the other hand, Anand Rathi of Finance Services, commented: Inflation data have come in line with our expectations. What we are seeing is there is a clear divergence between the WPI inflation and the cost of living because of elevated food prices. This is causing a policy dilemma, as food inflation is high but there are no definite signs of growth pick up. So we expect both monetary and fiscal stances will remain accommodative for an extended period of time.

New WPI Series

The new WPI series with a revised base of 2004-05 (from 1993-94) is expected to be rolled out by October this year. The new series with an updated product portfolio and increased data is expected to bring down food inflation, as the weight accorded to primary articles will be decreased to around 10% from the current 22.02%.

As far as the manufactured products category is concerned, the weightage is likely to increase to around 80% from the current 63.75%. Therefore, the point-to-point inflation rate derived from this index on a year-on-year basis will be driven by the wholesale prices of manufactured products rather than commodities like rice, cereals, pulses and wheat, which form a part of the essential consumption basket.

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