Negative inflation not unexpected: Montek

Negative inflation not unexpected: Montek
PTI
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First Published: Thu, Jun 18 2009. 06 08 PM IST
Updated: Thu, Jun 18 2009. 06 08 PM IST
New Delhi: Negative inflation is not a cause of concern, Planning Commission deputy chairman Montek Singh Ahluwalia said on Thursday when asked to comment on inflation, which turned negative, -1.61 for the first time after more than 30 years.
He further said it was expected that “inflation would appear negative for a little while”.
After reaching a peak at 12.9% in August last year, inflation turned negative in the first week of June declining by 1.6%. Though inflation turned negative, the prices of food items like fruit and vegetables, cereals and oil have continued to move up.
“This (negative inflation) is not a crisis, it is course correction or normalisation. There is nothing to worry as this is happening because of the base effect,” Planning Commission member Saumitra Chaudhuri added.
According to Chaudhuri, “as prices had risen to very high level last year, the negative inflation is more of a statistical issue.”
Voicing out a similar view, prime minister’s economic advisory council (PMEAC) chairman Suresh Tendulkar reiterated, “I think it is a temporary phenomena and I don’t expect it to last longer. It is mainly due to base effect.”
When asked if he expects the Reserve Bank (RBI) to take some action, he said, “Some banks are already reducing their lending rates so I don’t see RBI cutting the policy rate”.
Meanwhile, National Council of Applied Economic Research’s Rajesh Shukla said that inflation in negative territory is not of much relevance as there is not much impact on the retail market.He added that he did not expect much impact of it in the RBI policy which is expected in July.
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First Published: Thu, Jun 18 2009. 06 08 PM IST