CMIE projects inflation at 0.1 pc in 2009-10

The wholesale price index for the week ended April 18 was 0.26 per cent and it is expected to hover around this level in most months of fiscal 2009-10, CMIE said in its monthly review.

During the year, prices of fuel products and manufactured goods are expected to see a fall while inflation in primary articles will remain firm, it said.

The Reserve Bank of India (RBI) has projected lower money supply growth during FY 2010. Capacity expansion is expected to continue during FY 2010. All these factors are expected to keep downward pressure on inflation in 2009-10.

In addition to these factors, a higher base will also play a role in bringing down inflation in 2009-10, CMIE said.

Prices of fuel and electricity as a group are projected to see a decline of six per cent as against 7.4 per cent rise in FY'09. Electricity prices are expected to rise during the year but a decline in petroleum product prices will more than compensate for the rise in electricity prices.

WPI of manufactured goods is projected to fall 0.5 per cent during FY 2010. This will be the first decline after 1955-56 when WPI of manufactured goods had fallen 5.1 per cent, CMIE said in its review.

WPI of manufactured goods had fallen by 5.1 per cent. In recent years, the lowest inflation in manufactured goods was 1.8 per cent that was recorded in 2001-02, it added.

Among the manufactured goods, wholesale prices of textiles, rubber and plastic products, chemicals and basic metals and metal products will see a decline in the range of 1.0-10.5 per cent, the think-tank said.

Prices of textile products are projected to see a fall of one per cent while prices of the basic metals group will dip by 10.5 per cent.

Prices of food articles have not been affected by the global liquidity crisis as much as the prices of other product groups. The year-on-year rise in foodgrain prices remained above 10 per cent every month since November 2008.

Prices of foodgrain are projected to remain firm in FY10 too.

CMIE pointed out that the WPI of primary articles is projected to see a six per cent rise in FY 10. This group will be solely responsible for overall positive inflation, albeit negligible at 0.1 per cent in FY 10.