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Inflation plunges to historic low of 0.44 percent; deflation feared, rate cuts seen



By Ashok Poddar
22 March 2009 @ 1:57 pm IST

Mumbai - India's annualized inflation rate has fallen to a historic low level, plunging to 0.44, percent, triggering concerns that the country would soon enter a phase of deflation unless the central bank acts fast to prop up demand and growth.


Indian shopkeeper arranges prices of pulses at a wholesale market in the old quarters of Delhi, India
Indian shopkeeper arranges prices of pulses at a wholesale market in the old quarters of Delhi, India. India's annualized inflation rate has fallen to a historic low level, plunging to 0.44, percent, triggering concerns that the country would soon enter a phase of deflation unless the central bank acts fast to prop up demand and growth. (AFP Photo)
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According to government data released Thursday, the wholesale price index (WPI), India's most widely watched inflation measure, sank to 0.44 percent for the week ended 7 March, 2009, as compared to 2.43 percent for the previous week and 7.78 percent during the corresponding week of the previous year.

The inflation rate had touched a 13-year high of 12.91 percent last August due to global slump and slowdown in domestic demand.

A close look at the latest data reveals that decrease in prices of primary articles and fuel, power, light and lubricants resulted in the sharp fall in inflation rate.

The index for the Primary Articles Group (which has a weight of 22.02 percent on the WPI) slipped 1 percent compared to the previous week due to decline in prices of food articles such as gram (down 5 percent), tea and fruits & vegetables (down 3 percent each), jowar and condiments & spices (down 2 percent each) and masur (down 1 percent).

Also slipping were the prices of non-food articles such as raw cotton and linseed (down 5 percent each), rape & mustard seed and groundnut seed (down 4 percent each), copra (down 2 percent) and gingelly seed and sunflower (down 1 percent each).

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