RTTNews - India's inflation rate for the week ended May 9 rose to 0.61% from the 0.48% the week before, giving room for the incoming ministry to announce further stimulus packages to rein in inflation and contain slowdown in the economy. The inflation rate stood at 8.57% for the corresponding week of the preceding year, say data released Thursday by the Ministry of Commerce and Industry.

Going by provisional figures, the wholesale price index or WPI for all- commodities rose by 0.2% to 232.0 from 231.67 for the preceding week.

Inflation, based on the wholesale price index, increased mainly due to the higher prices of tea, ragi, fruits and vegetable, spices and some manufactured products covered under all-category groups.

The final estimate of inflation for the week ended March 14 was enhanced to 0.71% from the earlier provisional figure of 0.27%.

The main index for primary articles rose by 0.5%, due to the higher prices of tea, ragi, bajra, jowar, condiments and spices, raw silk, fruits and vegetables, wheat, masur as also arhar. However, the prices of urad, copra, raw rubber, barley and maize declined.

The index representing fuel, power, light and lubricants was unchanged at its previous week's 323.7.

The index of Manufactured Products rose by 0.1%, due to the higher prices of steel ingots, synthetic yarn, hessian and sacking bags, rice bran oil, hessian cloth, carbon black, lead ingots, zinc, oilcakes, imported edible oil as also zinc ingots, while those of liquid chlorine, sooji, coconut oil, maida, newsprint, all types of other boards, khandsari, salt, atta as also caustic soda declined.

The Reserve Bank of India Governor Duvvuri Subba Rao said last week that there was a scope for cut in lending rates and urged banks to bring down lending rates further in response to the apex bank's monetary measures.

The financial services firm, Nomura, in its report forecast India's wholesale Price Index-based inflation to touch around 5% to 5.5% by this fiscal end, thereby forcing the RBI to tighten money supply. RBI has targeted 4% inflation for this fiscal.

Nomura expects the economy and credit growth to recover this fiscal year, as banks are expected to ease credit controls and the country may face excess liquidity. Therefore, it expects increasing inflationary worries to force the RBI to start implementing exit strategies from its unconventionally-loose monetary policy, with the initial focus on liquidity management.

Nomura added that the central bank will initially focus on withdrawing liquidity by issuing treasury bills in the fourth quarter, followed by a cash reserve ratio hike of 100 basis points in 2010. It expects policy rate hikes of 75 basis points to be followed only later in 2010, once the recovery takes hold.

Meantime, the Centre for Monitoring Indian Economy or CMIE said the average inflation during this fiscal was projected to remain negligible at just 0.1%, compared to 8.3% in 2009.

The RBI has projected lower money supply growth as well as capacity-expansion to continue during this fiscal. These factors are expected to keep downward pressure on inflation in 2009-10. Higher base will also play a role in bringing down inflation in 2009-10, CMIE added.

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