RTTNews - India's inflation rate continued to be negative since last month, with the rate for the week ended July 18 standing at 1.54%, compared to the previous week's negative figure of 1.17%.

The annual rate of inflation was 12.54% 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 236.8 from 236.7 for the preceding week.

Inflation, based on the wholesale price index dropped, though food items like grams, fruits and vegetables became expensive.

The final estimate of inflation for the week ended May 23 was enhanced to 1.34% from the earlier provisional figure of 0.48%.

The increase in the prices of vermiculite, manganese ore, logs and timber, mutton, arhar, grams, fruits and vegetables, masur as also urad, kept the rate of the main index for primary articles to grow by 0.3% from the previous week's level. However, those of iron ore, felspar, condiments and spices, as also sunflower, declined.

The index representing fuel, power, light and lubricants declined by 0.1% due to the lower prices of aviation turbine fuel.

The index of Manufactured Products fell by 0.1%, due to lower prices of oilcakes, hessian and sacking bags, cottonseed, steel ingots, as also lead ingots, while those of imported edible oil, rice bran oil, sugar, butter, ghee, gur, all varieties of soft drinks, all types of acid, foundry pig iron, as also basic pig iron, moved up.

Reserve Bank of India (RBI) Governor D. Subba Rao, while reviewing the monetary policy for the first-quarter of this fiscal, projected the inflation rate of around 5% for this fiscal, higher than the earlier estimate of 4% made in the Annual Policy Statement of April 2009. He added that the comfortable levels of foodgrain stocks should help minimize the risks in the event of price pressures from the supply side. RBI would also monitor the level of liquidity so as to contain inflationary expectations, if supply side price pressures rose.

The country's annual rate of inflation turned negative last month due to the statistical base effect and not because of any contraction in demand. However, the sharp decline in WPI inflation was not commensurately matched by a similar decline in inflation expectations. Within WPI, the inflation of primary articles, particularly food articles, remained significantly positive. Moreover, consumer price indices (CPIs) remained high and even hardened in recent months. Global commodity prices rebounded ahead of global recovery and the uncertain monsoon outlook could further accentuate food price inflation, he said.

The RBI Governor also projected GDP for this fiscal at 6%, and possibly more. His higher growth projection thus marks a slight improvement over the growth expectation of around 6% indicated in the Annual Policy Statement. The overall macroeconomic scenario continued to be uncertain, although it was expected that the fiscal and monetary stimuli measures will supplement domestic demand in 2009-10. On balance, an uptrend in the growth momentum was unlikely before the middle of 2009-10, he added.

Mridul Sagar, chief economist at Kotak Securities, said the fall in inflation was slightly higher than expected. But he was expecting the inflation to come back strongly in the second half of the year.

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