India observes lowest inflation in the last 33 years but rising oil and food price worry economists

India is now observing lower than 1% inflation for the twelfth straight week and it would enter the negative zone next week. Inflation dropped to its lowest since 1977-78 to 0.13% in the week ended on May 30^th. This has evoked fear of another sharp increase in inflation which has been fuelled by the rising price of crude oil in the international market and prices of food items inside the country. Yesterday, crude oil price rose to $72 per barrel in New York. In the last seventy five trading days, prices of crude oil in the international market increased to $68 per barrel. In India, price of crude oil also increased to $68.66. Business Standard reports:

In a report called ‘India Macro Stance’, Goldman said that inflationary pressures were sequentially building up. Recent data on both the Wholesale Price Index and the Consumer Price Index showed a sequential bottoming out between February and April. Latest readings of price indices were showing a bottoming out of inflation, it said.

Along with rising crude oil prices, rising price of food might pose a threat the overall economic growth of the country. Prices of wheat, rice and sugar have been constantly rising for the last two months. In August 2008, Indian inflation rose 16 year high to 12.91% which created serious problem for common man as prices of daily necessities rose. However, Indian Prime Minister, Manmohan Singh said that stimulus package offered by the government will not add to inflation but to economic growth.

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