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Inflation touches 17-month low

business Updated: Sep 14, 2007 20:55 IST
Gaurav Choudhury

The downward march of the inflation rate continued after it hit a 17-month low of 3.52 per cent according to the latest weekly data but prices of essential items remained a matter of concern.

The Reserve Bank of India (RBI) has projected inflation close to 5 per cent for the current fiscal and 4-4.5 per cent for the medium term.

According to an Assocham study, prices of six essential commodities, including wheat, milk, tea, spices, vegetables, fish and meat, rose by nearly 25 per cent in last 12 months. The study showed that prices of spices and condiments, meat and fish, milk and milk products and fruit and vegetables showed maximum price fluctuations during the last 12 months.

With a series of interest rates hikes in quick succession, the RBI has quite aggressively tightened the monetary screws.

While the government has cut import duty on several items including cement and edible oils, the RBI has adopted a policy of monetary tightening by hiking the cash reserve ratio (CRR) and the repo rate to contain the price line.

While the headline inflation rate fell to 3.52 per cent for the week-ended September 1, prices of some essential items such as fruits rose by 17 per cent and those of marine products increased by 9 per cent.

The Wholesale Price Index (WPI)-based inflation rate stood at 3.79 per cent in the previous week. It was 5.34 per cent in the corresponding week a year ago.

The latest inflation figures may bring some cheer to the government after official data showed that industrial output growth fell to 7.1 per cent in July this year, compared with 13.2 per cent in the same month last year.

In addition, growth of six core infrastructure sectors, which have a combined weight of 26.7 per cent in the Index of Industrial Production (IIP) dipped to 6.3 per cent in July from 10.9 per cent in the same month of the previous year.