After inflation,deflation?

The concern that there may be some amount of deflation later this year got even stronger today as the annual rate of inflation slipped to 3.92 per cent in the week ending February 7...

Written by ENS Economic Bureau | New Delhi | Published: February 20, 2009 12:46 am

The concern that there may be some amount of deflation later this year got even stronger today as the annual rate of inflation slipped to 3.92 per cent in the week ending February 7,falling below the 4-per cent mark for the first time in more than a year. Now,with every single-point decline in the wholesale price index,which is used to measure inflation,the inflation rate falls more than proportionately because of the base effect from last year.

The WPI fell 0.2 per cent to 228 from 228.4 per cent in the previous week primarily because of a sharp fall in the prices of non-food articles,textile products,leather,metals and metal products and machinery and machine tools.

In its official response to the new data,department of economic affairs in the finance ministry emphasised the fact that inflation had fallen below the 4-per cent mark for the first time since December 29,2007,when it was around 3.8 per cent. It went on to add that inflation in two of the three individual commodity groups — primary articles and manufactured products — continued to decline and fell to 8 per cent from 9.1 per cent and to 4.9 per cent from 5.5 per cent,respectively. Inflation in the food index,too,fell to 8.9 per cent from 9.4 per cent in the previous week.

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