Monday, September 15, 2008

Finance Ministry’s Statement on Inflation

Annual rate of inflation, year on year as conventionally measured, moderated to 12.10 per cent for the week ending August 30, 2008 compared to 12.34 per cent reported a week earlier and 12.63 per cent for the week ending August 9, 2008. Inflation in the same period in the previous year at 3.72 per cent, however, was significantly lower.

 For some of the important consumer items, however, inflation in the current year remained low. The inflation for primary food articles at 4.6 per cent on August 30, 2008 was lower compared to the inflation of 7.1 per cent, a year earlier. In manufactured products also, inflation for cement (at 2.0 per cent in the current year compared to 12.9 per cent, a year earlier) and machinery items (at 5.5 per cent in the current year compared to 8.7 per cent, a year earlier) remained lower.

 Annual rate of inflation is a cumulative impact of changes in prices over 52 weeks. Since consumption is spread over time, average inflation over 52 weeks is often a better measure of the impact of price changes. Average 52-week inflation for three broad groups of commodities as summarized in Table below indicate that while overall inflation is higher in the current year, inflation for primary articles is lower compared to the rates in 2007-08.

 Seasonal factors play an important role in build-up of inflation. Deseasonalised index, therefore, are commonly used in assessing price build up. Seasonally adjusted inflation (annualized from month over month build-up) during August 2008 is provisionally estimated at 5.5 per cent, compared to 12.7 per cent in July 2008 and 29.5 per cent in June 2008. Annualized seasonally adjusted inflation in August 2008 has been the lowest since December 2007.

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