India's weekly inflation rate Thursday edged closer to zero and is widely expected to fall further in coming weeks, raising the likelihood of more rate cuts by the central bank, reported the Wall Street Journal. As measured by the wholesale price index, the inflation rate cooled to a new low of 0.27% in the week ended March 14 from 0.44% a week earlier, data issued by the Ministry of Commerce and Industry showed. It was above the median 0.13% forecast in a Dow Jones Newswires poll of seven economists. Analysts, however, said India will avoid a deflationary spiral. “It's more of a statistical play and not a real economic character,” said Manoranjan Sharma, chief economist at Canara Bank. “There's no threat of protracted deflation in India as consumer prices remain fairly high.” The wholesale price index rose 0.1% to 227.0 in the week ended March 14 from 226.7 in the previous week, due to higher prices of metals and food products. The wholesale price index is used as a proxy for inflation as the government reports wholesale price data more quickly and comprehensively than consumer price data. There are four different consumer price inflation measures, all of which have food as the chief component. The consumer price index for agricultural workers rose 11.62% from a year earlier in February, wherein food accounts for 69% of the basket. The benign trend in wholesale prices may give the Reserve Bank of India more ammunition to arrest a sharp slowdown in Asia's third largest economy. The central bank estimates that the wholesale price index-based inflation rate will be around 3% in the financial year ending March 31.
