India's inflation moderated more than economists expected and gave some respite to the government, which is battling the impact of the global financial crisis.

The inflation rate, based on wholesale price index (WPI), eased to 11.44% for the week ending October 4th from 11.80% recorded during the week ending September 27th. The dip has been attributed to falling prices of oil and manufactured goods.

The index for fuel prices declined by 1.1% on account of lower prices of naphtha, aviation turbine fuel and furnace oil while that of manufactured products such as mustard oil and textile items fell by 0.5%.

For the week ending September 27th, inflation had fallen marginally to 11.80% on account of declining prices of food items, including cereals and pulses. In early August, the inflation rate had touched to as high as 12.91%. It jumped into double digits after the government announced a hike in retail fuel prices in June.

Analyst feel that the inflation has probably peaked and may now continue to slow but the base effect was likely to play a key role in the next few weeks. However some economists had expected the rate to climb to 11.86%.

Chief Economist at Bank of Baroda, Rupa Rege Nitsure said, "Shortages of primary articles at the start of the festival season will also be seen and the import of non-oil articles will play some role."

"Everything will see a fair bit of decline. There will be some fall in the manufacturing, a small bit in the primary articles as well. The fuel index is also likely to go down," feels Saugata Bhattacharya, economist with Axis Bank.

At the same time, weaker price gains and a shortage of money in the banking system have allowed the RBI to shift its focus from fighting inflation to stimulating an already slowing economy. RBI has cut the CRR- mandatory reserve requirement of banks with the RBI-to 6.5%.

The inflation, which had remained above 12% for several weeks came down to 11.99% for the week ending September 20th. Inflation rate stood at 3.22% during the corresponding week in the year ago period.

C. Rangarajan, former Governor of RBI, has forecast the inflation rate to moderate to 10% by December 2008.

Although this dip may have given a reason to the government to cheer but there is still no respite to the common man as the prices of fruits, vegetables and some cereals continued to increase during the week under consideration.