Inflation grows @ 6.39 % vs. 6.46 %

After stubbornly remaining static for three consecutive weeks, India's inflation, based on the Wholesale Price Index (WPI), declined marginally in the week ended March 24. The point-to-point inflation was 6.39% compared with 6.46% in the preceding week.

The latest inflation reading is above the average estimate of around 6.25% by economists. The annual inflation rate was 4.06% during the corresponding week of the previous year. The slight dip in inflation may not bring much relief to the Government and the Reserve Bank of India (RBI) till it falls below 6%. Finance Minister P. Chidambaram wants inflation at 4%. The RBI has set a target of 5-5.5% for the year 2006-07.

It may be recalled that on March 30, the RBI announced a 25 basis point hike in the repo rate, a key short-term lending rate, besides raising the Cash Reserve Ratio (CRR) by 50 basis points to 6.5% in two stages. The surprising monetary tightening measures by the RBI took most economists by surprise as they had expected the central bank to wait at least till the annual policy meeting, scheduled for April 24, before taking any further steps.