BackInflation holds below 1% for 11th consecutive week
Inflation holds below 1% for 11th consecutive week
PremiumNew Delhi: The inflation rate held below 1% for an 11th straight week, giving policy makers room to take steps to buoy a slowing economy.
Wholesale prices rose 0.61% in the week to 16 May from a year earlier, matching the gain of the previous week, the government said in New Delhi on Thursday. Economists expected an increase of 0.69%.
Low inflation has allowed Reserve Bank of India (RBI) governor D. Subbarao to cut borrowing costs six times since October to boost the $1.2 trillion economy, forecast to grow this year at the slowest pace since 2003. “Inflation is reasonably down and reviving growth will be the government’s top priority," said Pranab Mukherjee, who took charge as finance minister this week.
“Inflation near zero gives the government a perfect opportunity to carry out reforms and give a fillip to the economy," said Dharmakirti Joshi, an economist at Mumbai-based Crisil Ltd, the local unit of Standard and Poor’s. Inflation may see negative readings soon but that can’t be described as deflation as consumer-price gains remain high, he said.
Prime Minister Manmohan Singh’s government, which this month won a second five-year term, plans to unveil its vision for the economy when it presents its full-year budget in the first week of July, Mukherjee had said on Wednesday.
South Asia’s biggest economy is likely to grow 6% in the year that started on 1 April, according to the central bank. That would be the slowest expansion since 2003 and compares with average growth of 8.6% in the previous five years.
To stimulate domestic demand, RBI has cut its repurchase rate by 425 basis points since October and reduced its reverse repurchase rate by 275 points.
Inflation in India has come down from a 16-year high of 12.91% in August last year as oil prices eased after reaching a high of $147 (Rs7,027) a barrel in July 2008.
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. The commerce ministry on Thursday revised the rate for the week ended 21 March to 0.84% from 0.31%.
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