Indian inflation at historic low

Prices have plunged after hitting a 13-year high last year

Inflation in India has fallen to its lowest rate in at least 14 years as the global economic slump hits demand.

Wholesale prices rose 0.44% in the year to 7 March, down from 2.43% in the previous week, the Ministry of Commerce and Industry said.

Inflation is now at the lowest since the current data series began in 1995 as Asia's third-largest economy slows.

The latest figures are a huge reversal after inflation in India reached a 13-year high of 12.9% last year.

Deflation concern

"A combination of falling primary and fuel prices, and a high base from last year have led to the sharp fall in inflation this week," said Sonal Varma, an economist at Nomura in Mumbai.

Mr Varma said he expects deflation to begin in India by April.

Unlike many countries India calculates inflation on factory gate, or wholesale, prices.

Prices paid by consumers in retail shops are higher and the issue of price growth and inflation has become a become a political issue in the run-up to national elections in April and May.

The government predicts economic growth will slow to 7.1% in 2009 after three years of 9% expansion. That would be the lowest level of growth in six years.