Inflation plunges to record low

India's inflation, as measured by the wholesale price index (WPI) stood at -1.74% in the week ended August 1 as compared to 1.58% in the previous week, the Government said. This was the ninth straight week of decline in the barometer of wholesale prices. Incidentally, inflation had peaked at 12.91% during the week ended Aug. 2, 2008. For the week ended 1st August, 2009 the WPI for "All Commodities" rose by 0.1% to 237.2 from 236.9 in the previous week. Inflation for Primary Articles stood at 5.17% while the same for Food Articles was 10.16%, Fuel & Power at -11.07%, Manufactured Products at -0.77% and Food Products at 8.68%. The Government announced that it had revised the inflation rate for the week ended June 6 to -1.01% from -1.61%. The WPI for the same week has been revised to 234.1 as compared to the preliminary estimate of 232.7.
Primary food prices rose again, 0.2% Week on Week. Just in the past month, they are up 3% (36% annualised). Year on Year, primary food prices are up over 10% now and with the poor monsoon, they will stay elevated at least for 2-3 months more. Given the decelerating momentum behind WPI, IIFL expects it to revert to positive YoY reading in October, but the rebound will be sharp, given the sharp decline in the base. It expects WPI inflation of over 5% by the end of the year.