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Inflation inches up to 5.6%

January 22, 2009

Inflation changed its trajectory during the week ended January 10 as the week on week wholesale price index for all commodities rose by 0.4% to 230. Year on year rise in prices stood at 5.6% compared to 5.24% during the previous week.

The increase primarily came from food and primary articles. Food articles were up 2.2% over the week while primary articles inched up by 1.2%. Economists however feel that it may not be such a bad thing to have happened as the trajectory that inflation was following in previous weeks, would have pushed India into deflationary phase by beginning of the next fiscal.

While inflation’s ill impacts are well known, deflation could be much more damaging as it would act as a pro-cyclic force in a slowing down economy. What the current figure shows is that probably the inflation will go down at a flatter trajectory now that can help India avoid the deflationary phase in next fiscal.

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