India's WPI based inflation rate fell to a 7 year low of 2.43 percent for the year ended on 28 Feb 2009. However, this fall in inflation for the sixth straight week was largely because of the fall in prices of manufactured items like metals, machinery and textiles. Food items are still 8% costlier than what it used to be one year ago.
The inflation rate is expected to fall further. It is likely to reduce below 1% mark next week and closer to zero by end of March. Thus, the new financial year 2009-10 is likely to begin with negative inflation.
Experts say that, the negative inflation that would come is due a steep surge in commodity and fuel prices in the corresponding months last year, which they call high base effect. Once this high base effect wanes in later months of 2009, inflation may enter into a positive territory.
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