Riding on tax cuts and softening commodity prices, Inflation is continuing its downward journey. The wholesale price index (WPI) for all commodities fell by 0.1% to 227.8 on weekly basis for the week ended February 14.
Growth in WPI on annual basis stood at 3.36% in the said week compared with 3.92% in the previous week. Faster than expected decline in inflation and high base effect of last year is likely to drag India into negative inflation territory by April. Another fuel prices cut, which the government is understood to be considering, will further hasten the downward journey of inflation.
However, with Reserve Bank of India expected to cut its policy and reserve rates in near term, relatively stronger rural demand, and expectations of improvement in consumer demand by mid-20009 may still be able to save India from facing any serious deflation threats.