NEW DELHI: India’s inflation headed towards zero with the wholesale price index falling as much as 200 basis points to a historic low of 0.44 percent for the week ended March 7.
Inflation was 2.43 percent for the week that ended on February 28. “In the last 30 years, there is no record of inflation falling this low since 1977-78”, Union Finance Ministry noted in a statement.
But, lower inflation numbers continue to hit the common man hard. Yashika Singh, economic analysis head of Dun & Bradstreet India told to The New Indian Express that primary articles inflation continues to be a concern, and that has contributed over 96 percent to the overall inflation. Food articles inflation still stands at a high of 7.4 percent.
Worried over the sliding growth story, policymakers believe that low inflation rate would give them enough opportunities to take measures to boost the Indian economy hit by global slowdown.
“It is a good development. It gives us reassurance that we can take measures to stimulate the economy,” Planning Commission Deputy Chairman Montek Singh Ahluwalia told reporters.
Similarly, industry chambers are demanding that the Reserve Bank of India should cut interest rates further to boost demand.
“We will not have sustained deflation,” Ahluwalia added. Deflation occurs when the inflation rate falls below zero percent, resulting in an increase in the real value of money.
The wholesale price index, released by the Commerce ministry, showed that the inflation rate dropped to an all-time low because of a decline of 1 percent in the index for primary articles and 0.8 percent in that for fuels over the week.
However, the index for manufactured articles remained unaltered.
No deflation: Cabinet Secretary
“I do not see any signs of deflation, as demand for certain core sectors like steel, cement and automobiles is picking as also rural demand. The inflation trend clearly shows that the stimulus packages rolled out by the government are starting to show results”, K M Chandrashekhar, Cabinet Secretary, told reporters on the sidelines of a conference organised by FICCI.
Last week, Arvind Virmani, Chief Economic Adviser in the Union Finance Ministry, denied India would face any deflation.
Asked whether there was any possibility for the Reserve Bank to cut the CRR further, Chandrashekhar said, “It is for the RBI to decide what measures it would want to take” adding that he would review the credit disbursal situation at the end of March.
Since September 2008 to infuse liquidity into the system, the RBI has reduced the repo rate under the liquidity adjustment facility from 9 per cent to 5 per cent, reverse repo rate from 6 percent to 3.5 percent, cash reserve ratio from 9 percent to 5 percent and statutory liquidity ratio from 25 percent to 24 percent.