Inflation eases to 5.24%

MUMBAI: Inflation for the week ended January 3rd dropped to 5.24% on back of easing of prices in all three major components of Wholesale Price Index (WPI), primary articles, fuel items and manufactured articles. Headline inflation as measured by wholesale price index was at 5.9% in the week before that, while it was at 4.3% in the corresponding week last year. (Watch)

The drop in inflation was in tune with expectations of bond markets.

While inflation has cooled off in most of the segments, inflation rate for food articles still remains a concern. It is hovering around 10%, while the corresponding week last year saw food price inflation at 1.86%. With the impact of truckers strike factoring in the week ended January 10, analysts are expecting food articles inflation to shoot up, triggering a 50 basis point upward spike in Whole Sale Price Inflation.

The fuel index with a weight of 14.23% in the WPI witnessed further deflation in the week. The annual deflation for fuel index is currently at 1.31%. With the expected retail fuel price cuts happening the prices of fuel index will show further deflation.

"The downward trend (in inflation) will continue. The expectation is inflation will come down to still more manageable numbers - 3-4% over the next three months," said Ashok Chawla, Secretary, and Department of Economic Affairs. But independent economists like Sudbadha Rao, Chief economist at Yes Bank are expecting inflation to fall at a faster pace to enter 1.5%-2% range by March. D K Joshi, Principal Economist at CRISIL said, "If inflation keeps on falling at the current pace, I am expecting a deflation for a brief period in July and August due to the high base effect."

Inflation for the week ended November 8, was downwardly revised to 8.71% as against provisional numbers of 8.9% released earlier.