The 20-basis-point fall comes as a much-awaited breather for the government, which, for the past few weeks, has been struggling hard to rein in inflation's unabated rally. Last week, the annual rate of inflation had hit a new 16-year high of 12.63 per cent on the back of a spike in the prices of certain food items and fuel products. The inflation rate for the corresponding week last year was 3.99 per cent.

In its response to the new inflation data, the finance ministry said, “There are some early signs of moderation of inflation.” It went on to reaffirm the fact that prices of most items in the WPI basket have either declined or remained unchanged and the annual rate of inflation in two — primary articles and fuel and fuel products — of the three major commodity groups showed signs of moderation.

The manufactured products’ group, however, showed an increase of 0.1 per cent, following a rise in the prices of sugar and khandsari, hessian bags and cloth, mustard and gingelly oil, liquid chlorine, caustic soda, computer and computer-based systems, electric motors and some items of steel.

The inflation rate for the group of 30 essential commodities, however, jumped significantly over the previous week’s figure of 6.74 per cent to settle at 7.24 per cent. This, the finance ministry said was due to the spike in prices of sugar, pulses and dry chillies. According to analysts, however, the surge in the prices of these products is primarily seasonal and slightly accentuated by a bad monsoon in several parts of the country, but is not likely to have any long-term implications for inflation.

However, there is still the concern that the central bank has not achieved the degree of monetary tightening in the economy as desired. DK Joshi, director and principal economist with CRISIL, said, “The RBI’s stance on interest rates is likely to remain hawkish given the current state of inflation.”

Tracking Items

Prices of most items in the WPI basket have either declined or remained unchanged

The manufactured products’ group showed an increase of 0.1 pc

The inflation rate for the group of 30 essential commodities jumped over the previous week’s figure of 6.74 pc to settle at 7.24 pc

This was due to the spike in sugar, pulses, dry chillies