NEW DELHI: Contrary to expectations, the rate of inflation eased only marginally to 8.84 per cent during the week ended November 15 from 8.90 per cent in the previous week, mainly owing to the rise in prices of various food and manufactured products although certain other items such as metals, imported edible oils, fruits and tea turned cheaper.
Despite the falling trend in WPI (wholesale price index) inflation for the third week in a row to over a five-month low, the slow pace of decline may prompt the Reserve Bank of India (RBI) to wait a while in reducing interest rates further to spur economic growth even as private sector banks are awaiting a rate cut for reducing their lending rates.
Among the private sector players, HDFC Bank Chairman Deepak Parekh ruled out a cut in lending rates until the cost of funds turned cheaper. “The cost of funds is still high, so once it comes down, we will reduce interest rates,” he told newspersons here. Even earlier, ICICI Bank CEO and Managing Director K. V. Kamath had sought further easing in money supply to enable a cut in interest rates by 200-300 basis points.
The apex bank’s action in this regard assumes particular significance as, amid fears of a slowdown, the GDP (gross domestic product) growth data for the second quarter of the current fiscal is slated for release on Friday.
According to the Finance Ministry’s analysis of the WPI data, the contribution of commodity groups to year-on-year inflation rate for the week ended November 15 shows that primary articles covering food, non-food and minerals (having a weight of 22.03 per cent in the WPI basket) accounted for nearly 31 per cent of the price rise, the major contributor being food articles.
Fuel and power (with a weight of 14.23 per cent) contributed 19 per cent while manufactured products (with a weight of 63.75 per cent) accounted for 50 per cent of the inflation.
In the ‘primary articles’ group, the inflation rate increased further to 11.90 per cent from 11.66 per cent, mainly owing to a rise in the prices of 20 items out of a total of 98 articles. These included tomatoes, soyabean, papaya, cabbage, some pulses and a few cereals.
As for the 30 essential commodities, the inflation rate increased by 40 basis points to 8 per cent during the week from 7.60 per cent in the earlier week. “There was an increase in the prices of primary essential commodities including pulses,” the Ministry statement said.