India's headline inflation rate is based on the Wholesale Price. Index; fell to 4.05% for the week to Aug 4 from 4.45% a week earlier, the commerce and industry ministry said today. The fall is on account of decrease in prices of food articles and statistical impact of a high base. In the year-ago period, the inflation rate was 5.08%. The latest inflation rate is below consensus estimates.

According to a NewsWire18 poll of 15 analysts, inflation was seen down at 4.35%. In the week to Aug 4, index for all commodities was 213.1, down 0.1% from 213.4 a week earlier. In the corresponding week last year, the index had risen 0.2% to 204.8.

India's headline inflation had hit a two-year-high of 6.69% late January, but has since eased primarily due to effect of a high base.

The Reserve Bank of India is targeting an inflation rate of close to 5.0% for the current financial year to March. For 2006-07, the year-end inflation rate was 5.94%--above the central bank's target of 5.0-5.5%.

The government and the RBI have taken a series of monetary and fiscal measures in recent months to stem inflation, including raising interest rates, cutting duties, reducing auto fuel prices, and banning futures trade in commodities.

In the quarterly review of the annual policy on Jul 31, RBI said the fear of high inflation remained despite a fall seen in the last few months and reiterated that inflation check was still the central bank's chief aim. The RBI raised banks' cash reserve ratio by 50 basis points to 7%, and removed the Rs 30 billion cap on reverse REPO in a bid to suck out excess liquidity. It feared a surfeit of liquidity in the banking system could have pushed down interest rates and stoked inflationary pressure.

Earlier this month, the government said external commercial borrowing of over $ 20 million has to be compulsorily spent overseas. The move is aimed at moderating capital flows into India.

In the week to Aug 4, the WPI for main commodity groups was as follows:

--Primary articles at 222.5, down 0.4% from 223.4 a week ago; food articles 220.3, down 0.7%; non-food articles 210.3, up 0.3% on week. Primary articles mainly comprise farm goods, and have 22% weight in WPI.

--Fuel, power, light and lubricants at 322.1, up 0.1% from last week's level of 321.9. The group has 14.2% weight in the WPI.

--Manufactured products with 63.7% WPI weight were at 185.6, down 0.1% from 185.7 a week earlier.

All numbers are provisional estimates, and may be revised after eight
weeks.

FINAL INDEX

Final index for all commodities for the week to Jun 9 was 211.8, unchanged from the provisional estimate. The final inflation rate for the week was 4.28%.