INFLATION RATE COMES DOWN TO 8.4%

Now the Reserve Bank of India can breathe a bit more freely as ever squeezing inflation rate has come down to a seven month low of 8.4%. This fall in the inflation rate would help the Reserve Bank to go for deep rate cuts which would in turn contribute in propelling the economy. The raising inflation rate had played a vital role in continuing economic down turn. This dip in the inflation rate has also reflected in the share markets as they showed a strong rally following the dip. This rate mainly depends on the whole sale prices and hence has declined but the inflation rate for the food articles has not declined. Instead the inflation rate of food commodities has increased to 10.43% from its last week’s rate of 9.93%. The cost of food products like sea fish, fruits, vegetables etc. has risen when compared to the last week. If we come to the fuel sector, the oil barrels which cost about $145 few months back has steeply fallen to a bottom value of about $45 a barrel now which has brought some smiles in the aviation industry. This would surely help positively the nation’s economy and also the Reserve Bank to cut down the rates.
The stock market also responded well to the dip in the inflation rate by climbing up by almost 480 points crossing the 9,000 mark further reaching 9, 200 points at the end. Over the years we have seen a correlation between the wholesale prices and the prices of the food commodities. This correlation has made it sure that the inflation rate of food products will also come down in the months to follow. The price of steel, chemicals and textiles also declined among the manufactured items this November which must finally end up in the rate cuts from the side of RBI.