The sharp fall in inflation rate, based on wholesale price index (WPI), is mainly on account of a good agricultural production last year with foodgrains production expected to touch a record 203 million tonnes, finance ministry sources said. Moreover, the prices of manufactured products and oil have also remained stable this year due to a slackness in demand.

The rate of increase in prices, the lowest since 2.97 per cent in November 1985, has been on the decline in the past few months due to a fall in prices of agricultural products.

During the week under review, the inflation rate fell by 0.53 percentage points to 3 per cent (provisional) compared 3.53 per cent (p) in the previous week and 7.15 per cent in the corresponding week of last year. Sources said with a normal monsoon forecast in thecurrent year, general price level was likely to remain stable in the coming months. Between January and June this year, rate of increase in prices of primary food articles have come down from about 10.5 per cent to 5.28 per cent now. The rate of increase in prices of manufactured products during the first half of 1999 has remained stable in the range of 3.5-2.25 per cent.

In the current week, the overall index declined by 0.2 per cent to 356.8 (provisional) from 357.5 (p) last week. The overall index in the corresponding week of last year was at 346.4. The overall index declined during the week mainly on account of a fall in index for primary food articles compared to the previous week.

Commodities whose prices fluctuated significantly during the reference week were; tea and fruits (down 6 per cent each), barley (up 4 per cent) and gingelly oil (up five per cent). Meanwhile, the final index for the week ended April 17 (the latest available) stood at 354.9 compared to 355.5 on the provisional index duringthe week.

The inflation rate based on the final index during the week was 4.05 per cent as against 4.08 per cent on provisional index. Compared to wholesale prices, inflation based on consumer price index for urban non-manual employees (CPI-UNME) was at 7.5 per cent in May. During the reference week, the index for primary articles declined by 0.6 per cent to 382.2 from 384.5 due to lower index for food articles. Food articles' index fell by one per cent to 448.1 from 452.5 due to cheaper tea and fruits (6 per cent each), jowar and poultry chicken (2 per cent each) and gram and arhar and mutton (1 per cent each). However, prices of barley (4 per cent), milk (2 per cent) and wheat, bajra, maize, moong and vegetables (1 per cent each) were costlier during the week. The other sub-group from primary articles, non-food articles rose by 0.1 per cent to 372.4 from 372.2 on higher prices of soyabean (3 per cent), and raw jute, raw tobacco, mesta, copra and linseed (1 per cent each). Prices of raw silk and rape andmustard seed (2 per cent each) became cheaper during the week.

Index for fuel, power, light and lubricants remained unchanged for the seventh consecutive week at 390.5. The index for the third major group in WPI, manufactured products increased marginally by 0.1 per cent to 336.2 from 336.0, mainly on account of increase in index for food products.