April 23, 2009

India's benchmark wholesale inflation surprisingly increased to 0.26% in the week ended April 11 from the year-earlier period, according to official data reported. The same was at 0.18% last week and 7.95% in the corresponding week in 2008. Experts still continue to say that though the inflation rate showed an upward move, the inflation rate would go down in the negative territory (below zero) in 1-2 weeks.

Higher prices of primary articles are referred to as one of the reasons for the inflation rate still maintaining above zero %. This category rose by 0.5% on a week-on-week basis, but on an annual basis the rate fell down by 10 basis points to 4.36 % because of “base effect”.

Indranil Pan, chief economist with Mumbai-based Kotak Mahindra Bank stated, “It is inevitable that the WPI will go into the negative territory, but it will happen because of base effect and will not be a deflationary situation.”

Regular consumption by the common man like cereals continue to remain high, at around 10 %. DK Joshi, an economist with Crisil India, a ratings and research agency said, “though the inflation rate may look low, prices of essential commodities continue to be on the rise.”