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Inflation falls to a record low of 0.18%

Last updated on: April 16, 2009 17:37 IST

Inflation eased to 0.18 per cent, the lowest ever in the last three decades, even as prices of food articles like pulses, cereals and vegetable hardened during the week ended April 4.

The wholesale price-based index declined by 0.08 per cent against 0.26 per cent in the previous week. The decline was mainly due to higher base effect and falling prices of some manufactured products.

The inflation stood at 7.71 per cent in the same week a year ago. The consistent decline in inflation but rising food prices present a difficult choice before the RBI to cut policy rates or not even as the industry clamours for easing of interest rates.

During the week, prices of food items like vegetable, pulses and imported edible oil were expensive during the week. Even the jet fuel, naptha and other fuel items were dearer during the week.

"Low inflation provides room for rate cuts and the RBI should and would certainly cut rates, which is healthy for revival," Nagesh Kumar, Director-General with economic research institution RIS, said.

Reserve Bank Governor D Subbarao recently said the main policy objective of the central bank in the current global crisis is to arrest the moderation in economic growth and restore the eroded market confidence.

Joshi said, "(The) RBI will cut rates anyway to prop up growth. The rate cut is certain and it will happen in the policy." The RBI is scheduled to come out with its annual monetary policy on April 21.

The industry, which is facing a slowdown, has been demanding further cut in interest rates. Industrial production also contracted in February by 1.2 per cent. Joshi added that inflation will move into the negative territory within a couple of weeks.

However, Kumar said inflation might not go into the negative zone, as the Indian economy has seen the worst and recover in six months, fuelling inflation.

The decline in inflation was mainly due to higher base effect and falling prices of some manufactured products like metals. The inflation stood at 7.71 per cent in the year-ago week. However, jet fuel, naptha and other fuel items were dearer during the week.

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