India's inflation rate in single digit after 21 weeks

New Delhi, Nov 13 (IANS) India's annual rate of inflation fell sharply to 8.98 percent for the week ended Nov 1, from 10.72 percent for the week before, in a development that should bring some cheer to the United Progressive Alliance (UPA) government, ahead of the ensuing state elections.

The rate, based on the official wholesale price index has come down to the single digit level after 21 weeks. The annual rate of inflation stood at 3.35 percent during the corresponding week of last year.

The sharp fall in the inflation rate was the result of a 1.3 percent drop in the official wholesale price index in a matter of just one week, notably due to a 3.4 percent decline in the index for fuels and 0.7 percent in manufactured products.

The statistics, released by the commerce ministry, also pointed out that primary articles, which have a weight of 22.02 percent in the general index, also fell 0.4 percent during the week under review.

The fresh statistics on inflation has come at a time when as many as six states go to the polls from Nov 14, for which opposition parties had made rising prices their main political plank against the government policies.

Yet, economists said they had predicted the inflation rate to fall because of a number of reasons, including the tight monetary policy adopted by the central banks in recent months and supply-factors.

'Single digit inflation was expected as agriculture production has started reaching the markets now. The reduction in some fuel prices have also helped controlling inflation,' said Shri Ram Khanna, head of the commerce department at the Delhi School of Economics

'But you can't expect retail prices of commodities to fall immediately because inflation has come down. That will take some time. Interest rates are still high at and purchasing power will increase only with increased consumer demand,' Khanna told IANS.

He expected the inflation rate to come down further by 2 percentage points by January and by 5 percentage points by April, when new crops arrive in the markets.