The Reserve Bank of India [Get Quote] (RBI) on Thursday said there were signs of moderation in inflationary pressures but warned that commodity prices, despite falling in the second quarter, will remain at elevated levels. 

In its pre-policy report, the central bank reiterated its resolve to bring down inflation to around 7 per cent by March 31, 2009, while lowering it further to 3 per cent over the medium-term.

 The central bank said inflationary pressures continued to persist in most emerging market economies fuelled by rising commodity prices particularly of energy, food and metals.  

Manufactured products were the major drivers of the wholesale price index-based (WPI) inflation that was at 11.44 per cent as on October 4, 2008, as against 3.2 per cent a year ago. RBI said that manufactured products, which included metals, cement, machine tools, food products and cotton textiles, contributed about 47.1 per cent to overall the inflation.  

Fuel, power, light and lubricants group constituted the next major contributor with 27.4 per cent. Primary articles, including food articles, raw cotton, oilseeds, sugarcane and minerals, contributed 25.3 per cent to the inflation.

According to latest data released by the government on Thursday, inflation was estimated at 11.07 per cent for the week-ended October 11 with the three major categories -- primary articles, fuel and manufactured goods  -- showing a decline.

The rise in inflation mainly reflected the impact of some pass-through of international crude oil prices to domestic prices as well as rising rates of iron and steel, basic heavy inorganic chemicals, machinery and machinery tools, oilseeds, sugar, raw cotton and textiles on account of strong demand as well as international commodity price pressures.

 The review said that international crude oil (Indian basket) prices increased by 72 per cent from $56.6 a barrel in February 2007 to $97.2 a barrel in September 2008. In rupee terms, the increase was almost 77 per cent over the same period.  

On the basis of the US Energy Information Administration study, the international crude oil prices are expected to remain at an elevated level in view of the relatively tight demand-supply balance.  

 The fuel group inflation increased to 14.6 per cent as on October 4, 2008, due to increase in the prices of mineral oils by 14.3 per cent over end-March 2008. 

The year-on-year WPI inflation, excluding fuel, was at 10.6 per cent as on October 4, 2008, as compared with 4.7 per cent a year ago.