The annual rate of inflation declined for the eighth straight week and fell to another historic low of 0.27 per cent for the week ended March 14, against 0.44 per cent for the week before.
The drop was mainly on account of a relatively higher rise in the official whosesale price index during the corresponding week of last year, as between March 7 and 14, the index rose 0.1 percent, data released by the commerce and industry ministry showed.
Among the three main commodity groups, the index for the manufactured products rose 0.2 percent, while that for primary articles registered a small increase. The index for fuel, however, remained unchanged over the week.
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 levels.