Declining food and fuel prices pushed inflation down for the eighth week in succession to 6.38 per cent for the week ended December 20, a trend that may allow RBI to effect more cuts in key rates to further growth.
Inflation, measured by movement in wholesale prices, came down by 0.23 percentage points from 6.61 per cent in the previous week. It was 3.74 per cent a year ago. Among the major items, prices of tea, fruits and vegetables declined during the period under review.
The index of fuel items came down by 0.5 percentage point on account of decline in prices of jet fuel (ATF) by 13 percentage point, bitumen by 7 percentage point, light diesel oil by 6 percentage point and furnace oil by 3 percentage point.
The prices of these fuel items, which are not decided by the government, declined on account of softening of crude oil prices in the international market. In the manufactured goods category, the imported edible oil, salt, cement, iron and steel became cheaper during the week.
The items which became dearer during the week include maize, bazra, jowar, gur and newspaper. The inflation for the week ended October 25 remain unchanged at 10.72 per cent. The fall in inflation will induce RBI to further cut key policy rates to boost economic expansion.
RBI Governor D Subbarao earlier in the week met Prime Minister Manmohan Singh to discuss the issues concerning economic slowdown. The government too, in its Mid-Year Economic Review tabled in Parliament, made a strong case for reducing key policy rates in the next six to 12 months.