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October 22, 2001
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India's inflation rate falls to new low in 2001

India's annual inflation rate fell to a new low this year in the week ended October 6 largely due to stable energy costs, abundant grain supplies and lack of demand, analysts said on Sunday.

The Commerce and Industry ministry said the year-on-year inflation rate measured by the wholesale price index fell to 3.18 per cent from 3.32 per cent in the previous week.

The inflation rate touched a high of 7.37 per cent in the same week in 2000.

Analysts said the inflation rate is expected to fall further to around three per cent in the coming months and remain stable till early next year.

"In the coming months the inflation rate will come down to three per cent and it is likely to increase next year if there is a surge in demand," said D H Pai Panandikar, director of New Delhi-based corporate think-tank RPG Foundation.

He said the demand was very low despite the festival season that starts next week and peaks in November during Diwali.

"The demand is so low the industry is not able to increase prices and pass on the increased cost of production to the consumers," another New Delhi based analyst said.

Analysts said last year the inflation rate was more than double the current level because prices of electricity and petroleum products had been raised.

"But this year oil and electricity prices are very stable," Panandikar said.

Finance Minister Yashwant Sinha has said he expects prices to remain stable and does not see inflation going beyond five per cent in the current year.

A Reuters poll last week of 10 research houses forecast average inflation will be five per cent in 2001-02 (April-March), and a marginally lower 4.9 per cent in the next financial year.

Inflation has been hovering around 5.0 per cent since falling from a 10-year high of 8.57 per cent hit in February.

Indian GDP growth slowed sharply to 4.4 per cent in the first quarter of 2001-02, from 6.1 per cent in the same period last year.

The wholesale price index for all commodities for the week ended October 6 rose marginally to 162.4 from 162.0 in the previous week.

The index for fuel, power, light and lubricants also increased to 230.5 compared with 228.5 at the end of September 29.

But the index for primary, food and non-food articles fell -- pulling the inflation rate down. The primary articles dropped to 170.1 from a week-ago's 170.8, food to 177.4 from 178.1 and non-food articles to 156.0 from 156.8.

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