India Inflation at all time Low

Wholesale price index for the week ending 7th March fell more than expected to 226.7 pulling inflation down to 0.44%, an all time low. Previous all time low was 1.13% in February 2002. Very soon inflation will fall into negative territory now. 

Declining Inflation

Inflation for the latest week came down to 2.43%. It is little better than I estimated below. But still if WPI number doesn't improve in the coming week then most likely inflation will dip below 0 by March end as I have calculated and shown earlier. Current level of inflation is lowest since June 2002. This is attributed to the record fall in the factory output. 

Now I present the historical graph of Inflation in India since 1995. 

The highlights of Inflation in India since 1995:

1) Lowest inflation was in February 2002, when inflation was at 1.13%.

2) Peak of 2000 can be attributed to the .com bubble when IT companies flooded India.

3) In February 2008, Inflation was at peak of 12.91%. 

Please give suggestions, analysis, information if you have on this topic. 

Easing Inflation

Continuing my previous blog on inflation below. Here is current inflation graph.

We see a steep drop in inflation resulting out of falling crude price which results in lowering price of commodities. Series duty cuts again eased the inflation. It is expected that by March end inflation could come to Zero!

Here is the calculation how inflation can very well cross 0. This is the inflation calculation for last month. Our WPI is decreasing constantly leading to lowering of inflation. WPI till 21/02/2009 is known. Now lets assume that WPI for following weeks remain constant at 227.6 (as it is constantly decreasing so in best case assume it doesn't decrease). So we see inflation for first week of March would be 2.38% and 0.84% for the second week of march. This is because there is a small jump in the inflation same time last year. So even if current WPI remains constant but when it is compared to a higher number the inflation figure comes down. And hence we very well see negative inflation by March end. This is the best case scenario, inflation can get to zero much before if WPI keeps falling.

Date	WPI	Date	WPI	Inflation
07/02/2009	228	09/02/2008	219.4	3.92%
14/02/2009	227.8	16/02/2008	220.4	3.36%
21/02/2009	227.6	23/02/2008	220.9	3.03%
	227.6	01/03/2008	222.3	2.38%
	227.6	08/03/2008	225.7	0.84%
	227.6	15/03/2008	226.4	0.53%
	227.6	22/03/2008	226.6	0.44%
	227.6	29/03/2008	226.7	0.4%
	227.6	05/04/2008	227.8	-0.09%
	227.6	12/04/2008	228.2	-0.26%

In my next blog I will explain impact of inflation less than 0 called 'Deflation'.