Inflation declines to 8%

WPI inflation for the week ending Nov 29th declined to 8.00%. Marginally higher than consensus (Consensus: 7.9%, Previous week: 8.40%, last year corresponding week: 3.89%).

Inflation drivers: The WPI inflation was primarily driven down by declining prices of food articles under Primary Articles. The prices of Fuel products and Manufactured products remained unchanged.

Bottomline: Finally as expected, the prices of food articles like fruits and vegetables are declining due to seasonal factors. Watch out for inflation data next week that will reflect the domestic fuel price cut of 10% in petrol and 6% in diesel prices. WPI inflation will be much lower in March’09 than RBI’s target of 7%. This gives RBI much needed legroom to take further pro growth policies.