Inflation rises marginally to 0.31 per cent

02-04-09 India's annual rate of inflation rose marginally to 0.31 per cent for the week ended March 21, after declining for eight consecutive weeks, official data showed Thursday. The inflation rate was 0.27 per cent the week before.

The marginal rise was mainly on account of a rise in the official wholesale price index compared to the corresponding week of last year. Between March 14 and 21, the index rose 0.1 per cent, data released by the commerce and industry ministry showed.

Among the three main commodity groups, the index for manufactured products rose 0.2 per cent, while that for primary articles registered a small increase. The index for fuel, however, declined marginally to 320.9 (provisional) from 321.0 (provisional) for the previous week due to lower prices of furnace oil.

Economists, who have already warned of a deflation in the Indian economy, explain that lower inflation rate does not necessarily mean that prices have fallen. Lower inflation rate only means the rate of rise in prices has come down, not the actual prices.

Deflation is a decline in the general price level. It is caused by factors such as low money supply and credit, and a curb in spending by households, industry or government. The lower demand during deflation often leads to a rise in unemployment.

Dalip Kumar, the head of projects at the National Council of Applied Economic Research (NCAER), a Delhi-based think tank, said the inflation figures would now continue to rise and would increase by at least one more per cent by the month-end.

"The cost of food commodities and fruits has gone up. Being an off-season for fruits and vegetables, there is a shortage of these products. This would lead to minor rise in inflation," said Kumar.

However, DK Joshi, principal economist at credit rating agency Crisil Ltd, said the economy would see inflation going below zero in the next two-three weeks.

Joshi was of the view that the prices of food commodities during the corresponding period last year also went up but the inflation continued to decline. "The prices are correcting very sharply," Joshi said.

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