After a gap of five months, the annual rate of inflation based on wholesale

RELATED ARTICLES Low growth will moderate inflation, lead to rate cut: Fitch Inflation still sticky in manufacturing sector: Pranab Inflation remains a concern: RBI Inflation risks persist; likely to be 7% by March end: RBI Lower inflation to give RBI leeway for relaxing tight policy

price index (WPI) fell to below double-digit levels to 9.97 per cent in July, while it was 10.55 per cent in June this year.

However on a month-on-month basis, food pric­es, non-food articles, fuel and power prices increased while there was a marginal decline in manufactured products.

The build up of inflation during 2010-11 was lower at 3.59 per cent compared to a build up of 4.6 per cent in the corresponding period of the previous year. But economists point out that the build-up is happening from a higher base and thus the prices in absolute terms are going up at the same rate for the final consumer.

Economist at Icra Aditi Nayar said: “With the inflation rate for May being revised upwards to 11.1 per cent, revisions in the provisional inflation figures for June and July cannot be ruled out. Broadly, we expect inflation to ease to around 6.5 per cent to 6.7 per cent by December. Depending on the rabi harvest, inflation may decline to 6-6.2 per cent by the end of the current financial year.”

“Although the food price index has increased in mo­nth-on-month terms betwe­en June and July, weekly da­ta shows a cooling of food prices from mid-July onwa­rds, reflecting the improved monsoon rainfall. The sha­rp decline in food price inflation, from 20 per cent in December 2009 to 11 per cent in July 2010, is largely on account of the base effect,” said Nayar.

Siddharth Shanker, eco­nomist at, Kassa Gr­oup, sa­id, “The annual rate of infl­ation coming to 9.97 per ce­nt has no relevance for me and it is merely a statistical play. I think inflation is sp­reading fast. While monetary tightening can control inflation to some extent.”

“The government will have to look at increasing production and productivity so that the growth is maintained with low inflation. I do not see the real inflation coming down anytime soon till structural changes are brought into the system,” said Shankar.