Inflation drops further to 6.84 percent

New Delhi, Dec 18 (IANS) India's annual rate of inflation dropped further to 6.84 percent for the week ended Dec 6 from 8 percent the week before, government data showed Thursday.

The sharp drop was triggered largely by the Dec 5 reduction in petrol and diesel prices, analysts said.

The inflation rate was 3.84 percent during the corresponding week last year.

The official wholesale price index (WPI) for all commodities during the week declined 1.1 percent to 231.1 points from 233.6 points the week before.

Data on wholesale prices released by the commerce and industry ministry showed that the index for primary articles declined 0.4 percent to 249 points, from 249.9 points the previous week.

The index for food articles declined 0.5 percent while that of non-food articles rose marginally to 234.6 points (provisional) from 234.4 points (provisional) the week before.

The index for fuels and lubricants also fell 3.7 percent to 332.1 points (provisional) from 345 points (provisional).

The index for the manufacturing sector declined 0.3 percent to 202.4 points (provisional) from 203.1 (provisional) the previous week.

Dalip Kumar, the head of projects at the National Council of Applied Economics Research (NCAER), an economic research institution, said the rate of inflation would moderate to below 5 percent by February next year.

The drop would boost demand for all commodities, he added.

Economists said the fall in fuel prices and the tight monetary policy adopted by the central bank in recent months would push inflation further downwards.

According to Shriram Khanna, head of the Commerce Department at the Delhi School of Economics, the concern now is not the inflation. 'The most important thing that will drive our economy now is how developed countries stabilise their financial sectors and the markets,' Khanna feels.

Experts said the retail prices of commodities would not fall immediately just because inflation has come down. 'Interest rates are still high and purchasing power will increase only with increased consumer demand,' Kumar said.