Slow inflation makes room for stimulus

Slow inflation makes room for stimulus
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First Published: Thu, Jun 04 2009. 09 55 PM IST
Updated: Thu, Jun 04 2009. 09 55 PM IST
New Delhi: India’s inflation slowed in the fourth week of May, giving policymakers room to add to measures to stimulate an economy growing at the weakest pace since 2003.
Wholesale prices rose 0.48% in the week ended 23 May from a year earlier, holding below 1% for the 12th straight week, the commerce ministry said in New Delhi on Thursday. Economists expected a 0.56% increase. Prices had gained 0.61% in the previous week.
Six interest rate cuts in as many months and three fiscal stimulus packages are providing India with a stimulus worth almost 7% of gross domestic product, according to the Reserve Bank of India (RBI). Finance minister Pranab Mukherjee says next month’s budget will include further measures to support growth.
“Inflation near zero gives the finance minister the comfort to craft policies that would help boost the economy and save job losses in some sectors,” said D.H. Pai Panandiker, president at RPG Foundation, an economic policy group in New Delhi.
Inflation has tumbled from a 16-year high of 12.91% in August last year as oil prices fell from a record $147 (Rs6,938) a barrel in July. That’s allowed RBI to cut its repurchase rate by 425 basis points since October and reduce its reverse repurchase rate by 275 points.
The wholesale inflation rate 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 28 March to 0.84% from 0.26%.
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First Published: Thu, Jun 04 2009. 09 55 PM IST
More Topics: Inflation | Economy | GDP | WPI | India |