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INFLATION WATCH

S.D. Naik

THE annual rate of inflation measured in terms of the wholesale price index (WPI) on a point-to-point basis maintained its downward movement for the fourth successive week. It touched a 20-week low of 2.08 per cent for the latest recorded week ended Febr uary 19, down from 2.37 per cent in the preceding week.

The 0.29 per cent decline in the inflation rate during the latest week was largely on account of the decline in the inflation rate for the fuel group and the manufactured products group. The inflation rate for the fuel group decline to 13.13 per cent fro m 16.35 per cent in the previous week.

The inflation rate for the manufactured products group which has remained depressed for a long time, slipped below the one per cent mark to 0.92 per cent from 1.04 per cent during the week. Absence of demand pressure during most of the year, subdued inte rnational prices and increasing domestic and international competition, has kept the inflation rate for the manufactured products group lower than the overall inflation rate.

The inflation rate during the corresponding week of last year (February 20, 1999) was much higher at 5.70 per cent based on final data.

The inflation rate based on consumer price index for industrial workers (CPI-IW) rose marginally to 0.5 per cent in December 1999 after dropping to zero per cent in November. It was 15.3 per cent for the month of December 1998.

The low inflation rate based on CPI-IW) in the current fiscal is the consequence of stability in retail prices seen in most of the food items which together have a weight of 57 per cent in this index. Another significant feature this year has been the na rrowing gap in the WPI and CPI-IW based inflation rates and their virtual convergence in September 1999.

The major price movements during the latest week were for vegetables (up four per cent), mesta (up two per cent), pulp (up three per cent), skelps (up two per cent), tea (down five per cent), jowar (down two per cent), kardi seed (down three per cent), r aw wool (down two per cent), rape and mustard oil (down three per cent), coconut oil and rice bran oil (down two per cent), soda ash (down five per cent), and zinc (down four per cent).

The official WPI for all commodities (1981-82 = 100) for the week ended February 19, 2000 remained unchanged at the previous week's level of 363.4.

The final WPI for all commodities (1981-82 = 100) for the week ended December 25, 1999 stood at 364.6 against the provisional index of 365.2 given earlier. Thus, the annual rate of inflation based on final data in terms of the WPI calculated on a point-t o-point basis was 2.76 per cent against 2.93 per cent based on provisional data.

Over a period of four weeks (January 22 to February 19), the index rose for jute, hemp and mesta textiles by 3.4 per cent and industrial wires & cables by 2.3 per cent. Over the same period, the index declined for vegetables by 6.5 per cent, fruits 3.5 p er cent, condiments and spices 2.8 per cent, other food articles 12.1 per cent, edible oils 2.2 per cent, and motor vehicles, scooters, bicycles & parts by 2.1 per cent.

As for the recent commodity price movements, groundnut oil was quoted in Mumbai market on March 6 at Rs. 365 per 10 kg against Rs. 370 on February 28. Among supplementary oils, imported palmolein was quoted at Rs. 212 per 10 kg on March 6 against Rs. 205 on February 28.

Sugar prices displayed a steady to firm trend on the Navi Mumbai wholesale market over the last week. In spot deals on March 6, S-30 variety was quoted at Rs. 1,460/1,515 per quintal while M-30 variety was quoted at Rs. 1,505/1,576 per quintal.

In bullion, standard gold was quoted in Mumbai market on March 6 at Rs. 4,580 per 10 gm against Rs. 4,610 on February 28. Silver .999 was quoted at Rs. 8,030 per kg on March 6 against Rs. 8,015 on February 28.