Inflation back to 2002 level at 3.03 percent

New Delhi, Mar 5 (PTI) Inflation declined to about a
six-and-a-half-year low of 3.03 percent by the third week of
February as most food, fuel and manufactured items turned
cheaper, justifying the RBI's rate cut move to propel growth.

With wholesale prices-based inflation coming to a
level seen on August 10, 2002, by falling 0.33 percentage
points from 3.36 percent a week ago, economists expect the
RBI to further cut rates next month.

This is the fifth consecutive week that inflation has
fallen.

Economists expect inflation to reach zero by this
fiscal end.

While most food products in raw form saw a decline in
prices, manufactured food items like sugar and ghee turned
marginally expensive.

Most other manufactured products also became cheaper,
with the exception of metals alloys and machine tools.

Crisil Principal Economist D K Joshi said, "There could
be further rate cuts. I believe there could be a cut of 50
basis points in both the repo and reverse repo rates next
month."

With inflation going below four per cent, the RBI
Wednesday cut the short-term lending and borrowing rates --
the repo and reverse repo -- by 50 basis points to arrest
economic slowdown with India's GDP growth falling to over a
five-year low of 5.3 percent in Q3 of the current fiscal.

However, the central bank has noted that consumer
prices are still high, but expressed the hope that they may
also come down after some time.

The Reserve Bank pointed out that consumer price
inflation, as reflected in various indices, is in the range of
9.85-11.62 percent as of December 2008-January 2009 and is yet
to show moderation.

"Consumer price inflation has remained at elevated
level due to increase in primary articles' prices. With WPI
inflation having moderated significantly, consumer price
inflation may also be expected to decline, though with a lag,"
the RBI said.

However, it is mainly wholesale price inflation that
is widely tracked.

The wholesale price index (WPI), on which inflation is
based, declined by 0.1 percent to 227.6 points for the week
ended February 21, 2009, from 227.8 points a year ago.

Among food products, vegetables turned cheaper by 3.2
per cent and fruit by little less than one per cent. Bajra,
jowar and gram also became cheaper.

However, prices of maize and arhar moved up.

Among non-food items in raw form, raw silk prices
declined by seven per cent, copra by three per cent and rape
and mustard seed and gingelly seed by one per cent each.

In fuels, jet fuel saw a 4 per cent decline in prices,
and furnace oil by one per cent.

In the manufactured goods category, sugar turned
expensive by two per cent and ghee by one per cent.

Prices of machinery and machine tools also rose, but
those of textiles, basic metals alloys and transport equipment
and parts declined. PTI DP
PMR