Inflation dips below 3% on cheaper food prices

NEW DELHI: Lower prices of food items and that of some manufactured goods pulled inflation below 3 per cent to 2.97 per cent for the first time in more than 5 years.

The inflation rate for the week ended October 27 is well below the Reserve Bank's new medium term target of 3 per cent. Inflation in the previous week was 3.02 per cent and 5.35 per cent in the corresponding week a year ago.

Interestingly, inflation had hit a two-year high of 6.69 per cent in January, but softened after the Reserve Bank tightened policy and the government cut duties on a number of items to cool prices.

To suck out excess cash from the market, the apex bank further raised cash reserve ratio by 0.5 per cent to 7.5 per cent in its half-yearly review in October.

As a result, inflation remained well below RBI's projection of close to 5 per cent for the current fiscal.

During the week under review, prices of cereals, pulses fruits and vegetables declined, while wheat, poultry chicken, fish-marine, milk and eggs turned expensive.

Among manufactured items, prices of gur, paper and paper products and lead ingots declined, while products like atta, maida, imported edible oils and dry cells got dearer.

However, going forward, there is a potential threat from soaring oil prices on inflation, analysts said.

Oil prices on Wednesday had touched $100 per barrel. New York's main contract, light sweet crude for December delivery, hit an historic peak of $98.62 per barrel. It later stood at $98.00, up $1.30.