India's Inflation Hits Negative Mark for the First Time Since 1977

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For the first time since the year 1977, the inflation rate of India turned negative this year. And since the implementation of Wholesale Price Index (WPI) series in 1995, this is for the first time that the country's annual rate of inflation touched the negative mark.

According to the official data, India's inflation hit the bottom line on the week ended on August 1, 2009, when its inflation rate touched down minus 1.74%. But the beginning of the year was certainly not the same.

The nation started the year with an inflation rate of 5.24% in the week ended on January 3. The next two weeks also saw growing inflation rates. But then, came declining stages which drove the rate of inflation gradually towards the negative mark. In the week ended June 6, the inflation rate of the country slipped into the negative mark (minus 1.61%) for the first time in two decades. The following few weeks saw the same trend prevailing. For the 3 consecutive months, the inflation rate couldn't rise up to the positive mark. It's only in the week ended on September 5 that India's inflation again had positive figures.

Inflation in India is calculated on the basis of Wholesale Price Index (WPI), where a set of 435 commodities are taken into consideration while calculating inflation. Now the question is why is this fall? According to the experts, the reason behind the downfall of the inflation is the slowing down of industrial activities in India. Lower global oil and metal prices also have some role to play on it. Spiraling deflation – where the falling prices of goods compels the consumers to delay their buying process, also deepened the downturn.

However, the country managed to come out of it as the inflation again touched the positive mark on the week ended on September 5 with a rate of 0.12%. In November 2009, it climbed up by 4.78 percent after a rise by 1.34 percent in October. Economists opined that, the steep jump of inflation that did out-do the market projections of a 4.2% rise has speeded up the possibility of monetary tightening for keeping a cap on the rising prices.