Pune: Even as the inflation fell to a three-decade low of minus 1.61%, Reserve Bank governor D Subbarao today said there is no threat of deflation as food and crude oil prices are still firm.
“India does not suffer from any demand constraints, therefore there is no concern of deflation,” Subbarao told reporters here.
Although wholesale price index is negative, there are certain parts of the index, like food articles, where inflation is significant, he said.
At the same time, oil prices are firming up, he said, adding there is talk that world food production will be lower than the trend.
“We will take into account all these developing trends in the July review,” he said.
According to the RBI annual monetary policy, inflation is projected at 4% at the end of March 2010.
The annual rate of inflation, calculated on a point-to-point basis, stood at minus 1.61% for the week ended 6 June as compared to 0.13% in the previous week and 11.66% during the corresponding week of previous year.
However, food articles were costlier by 8.7% from the comparable week last year as pulses moved up 17%, cereals 13.5% and fruit and vegetables 10%.