Inflation fall to 8.66 percent – experts warn of fuel price effect

New Delhi: Moderation in prices of food and manufactured items brought inflation marginally down to 8.66 per cent in April but experts feel the recent increase in petrol prices will have implications in the near future.

The government, however, encouraged by decline in inflation during April from 9.04 per cent March, hoped the rate of price rise would continue to moderate in coming months.

Oil firms have increased petrol prices by around Rs 5 per litre late last week. Prices of diesel and LPG, which are currently regulated, are also expected to be hiked soon.

The inflation data for April does not reflect the steep rise in petrol prices, the highest ever, announced on Saturday.

The 8.66 per cent headline inflation for April, as measured by Wholesale Price Index (WPI), is below Reserve Bank`s 9 per cent average inflation projection for the first half of the year.

"The April prices have come down both on manufacturing sector and the food sector… This is good trend and if it continues, then perhaps it will be more moderated," Finance Minister Pranab Mukherjee told reporters here.

He pointed to both food and manufacturing inflation showing moderation in April as compared to the March figures.

Inflation in food articles have come down to 8.71 per cent in April from 9.47 per cent in March.

Meanwhile, manufactured products, which have the highest weight of 64.9 per cent in the WPI, have slipped to 6.18 per cent from 6.50 per cent month-on-month.

In its monetary policy for 2011-12 released earlier this month, the RBI had projected inflation to average around 9 per cent during the first half of the fiscal, before moderating to 6 per cent by year-end.

However, experts said that the May inflation numbers, which will be released next month, will show the impact of the hike in retail prices of fuel products.

"Though inflation has marginally softened in April, it continues to remain sticky and considerably higher than the desired level. There is a worry that with the recently announced fuel price increase, inflation would again elevate in the short run," Deloitte, Haskins & Sells director Anis Chakravarty said.

The government today also put the WPI for March at 9.04 per cent, higher from the earlier estimate of 8.98 per cent.

The revision was carried out as metal products were not incorporated earlier due to a programming error, an official statement said.

Similar changes have been made for some previous months also, including January.

In addition, the inflation for February has also been revised upward to 9.54 per cent from the provisional 8.31 per cent. .