×
Home Companies Industry Politics Money Opinion LoungeMultimedia Science Education Sports TechnologyConsumerSpecialsMint on Sunday
×

Inflation rate of 0.61% gives PM room for stimulus plan

Inflation rate of 0.61% gives PM room for stimulus plan
Comment E-mail Print Share
First Published: Fri, May 22 2009. 12 28 AM IST

 Task ahead: Prime Minister Manmohan Singh told lawmakers on 19 May that an important challenge for the new government will be to and revive growth that’s slowed to the weakest pace since 2003. Ramesh
Task ahead: Prime Minister Manmohan Singh told lawmakers on 19 May that an important challenge for the new government will be to and revive growth that’s slowed to the weakest pace since 2003. Ramesh
Updated: Fri, May 22 2009. 12 28 AM IST
New Delhi: India’s inflation held near a three-decade low, giving Prime Minister Manmohan Singh’s re-elected government room to take steps to support a slowing economy.
Task ahead: Prime Minister Manmohan Singh told lawmakers on 19 May that an important challenge for the new government will be to and revive growth that’s slowed to the weakest pace since 2003. Ramesh Pathania / Mint
Wholesale prices rose 0.61% in the week to 9 May from a year earlier after gaining 0.48% in the previous week, the government said on Thursday. That matched the median forecast in a ‘Bloomberg’ survey of economists.
An important challenge for the new administration will be to open up the economy and revive growth that’s slowed to the weakest pace since 2003, Singh told lawmakers on 19 May.
“Inflation is not a primary concern at this point of time and that gives policymakers leeway to focus on policies that will help stimulate slowing demand,” said Sonal Varma, a Mumbai-based economist with Nomura Securities Co. Ltd. “While inflation can post negative readings, this cannot be characterized as deflation.”
Bonds extended declines after the inflation data. The yield on the 6.05% note due February 2019 rose to 6.43% at close in Mumbai from 6.39% earlier, according to the central bank’s trading system. Wholesale prices may decline for a few weeks in the coming months, though that doesn’t mean India is in the grip of deflation, Reserve Bank of India (RBI) governor D. Subbarao said last week. Inflation in India has held below 1% for two months, after reaching a 16-year high of 12.91% in August. Slower inflation enabled RBI to slash interest rates six times since October.
RBI looks at other inflation gauges beside the Wholesale Price Index when deciding its monetary stance, according to Subbarao. Consumer prices paid by industrial workers rose 8.03% in March from a year earlier, after gaining 9.63% the previous month, according to government data.
Manufactured price inflation, accounting for about 64% of the inflation basket, rose 1.14% in the week from a year earlier, compared with a 1% gain in the previous week, Thursday’s report showed. Prices of fruit, vegetables, cooking oil, spices and textiles also increased.
Lower interest rates combined with tax cuts and government spending provide a stimulus of more than $85 billion (Rs4.03 trillion), or 7% of gross domestic product, according to RBI estimates.
That may help economic growth recover to 6% in the year that started 1 April, from 5.3% in the quarter ended 31 December, Subbarao said on 21 April.
India’s wholesale inflation rate published on Thursday may be revised in two months, after the government receives additional price data.
The commerce ministry on Thursday revised the rate for the week ended 14 March to 0.71% from 0.27%.
Comment E-mail Print Share
First Published: Fri, May 22 2009. 12 28 AM IST
More Topics: Inflation | Markets | Commodities | Economy | Stocks |