The Hindu : Front Page : Sharp fall in inflation rate

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Friday, Nov 14, 2008
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Sharp fall in inflation rate

Special Correspondent

NEW DELHI: Contrary to the expectations of both economic analysts and policy planners, the rate of inflation dipped sharply to 8.98 per cent for the week ended November 1 from 10.72 per cent in the previous week, thanks mainly to lower prices of non-administered petroleum products, certain food items and other commodities such as metals.

The earlier-than-expected slide in the wholesale price index-based inflation to a single digit after a gap of 21 weeks should bring comfort to authorities. For, the Reserve Bank of India (RBI) can now take further steps to ease money supply so as to catalyse growth in the economy, which is experiencing a severe slowdown in the wake of the financial crisis the world over.

The fall has come as a pleasant surprise to many top economists who projected that the inflation rate would slide below double digits only by early next year.

Apart from others who had voiced similar views in the recent past, it was only earlier this week that the Prime Minister’s Economic Advisory Council (PMEAC) Chairman, Suresh Tendulkar, said: “Inflation seems to be on the decline as international commodity prices are coming down and the domestic harvest is good. Early next year, inflation would be in single digit.”

What aided the sharpest-ever fall in WPI inflation in over five months was the slump in the prices of various petroleum-based fuels such as naphtha, aviation turbine fuel (ATF), furnace oil and light diesel oil as global crude prices plummeted from $145 a barrel in July to $56-60 a barrel.

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