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

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).