During the corresponding period last year, the inflation rate was higher at 8.78 per cent, mainly on account of an upsurge in food prices due to lower production.

The sharp fall in the rate is mainly on account of a higher base last year, due to higher prices of food articles, especially vegetables.

For example, the index for vegetables during the current week is at 457.4, against 746.1 in the same period last year, lower by 63.12 per cent. Though vegetables' prices are moving up this year also, they are rising at a much lesser rate compared to last year.

The fall in inflation isdespite a marginal rise in the overall index (Base: 1981-82=100) during the current week at 357.4 (Provisional), compared with 357.3 (Provisional) in the previous week.

The final WPI for the week ended May 29 dropped marginally to 357.6, against 357.9 (Provisional) in the previous week, while the annual rate of inflation calculated on the final index on a point-to-point basis for the same week also fell to 3.8 per cent, from 3.9 per cent a week ago.

The annual rate of inflation based on the consumer price index for industrial workers (CPI-IW) has also recorded a sharp fall of 2.4 percentage points in June to 5.3 per cent, from 7.7 per cent in May and 12.4 per cent in June last year.

Meawhile, the National Council of Applied Economic Research (NCAER) has forecast that a normal monsoon and another bumper harvest, besides increasing competition from global players in the manufacturing sector, will keep the inflation at low levels in the days to come.

The index for primary articles has risen only by 0.18per cent during the year, while the indices of manufactured products and fuel, power, light and lubricants have risen by 1.23 per cent and 4 per cent respectively.While the index for food articles rose by 0.3 percentage points, non-food articles' index fell slightly, and the index for manufactured products declined by 0.1 per cent during the week.

The index for fuel, power, light & lubricants, the third major item in the WPI, remained unchanged at the previous week's level.

Commodity prices which saw major fluctuations during the reference week were barley (up 5 per cent), poultry chicken (up 3 per cent), pulp (up 7 per cent), trailors (up 6 per cent), hydrogenated vanaspati (down 16 per cent), soyabean (down 8 per cent), mutton (down 3 per cent), and viscose filament yarn and linseed oil (down 5 per cent each). Decline in prices of viscose filament (5 per cent) and filament yarn synthetic (1 per cent) pushed down the index for textiles to 319.6 during the reference week from 319.9 a week ago. However,prices of polyster staple (3 per cent) and cones (1 per cent) became dearer during the week.