New Delhi: Terming the declining inflation as a “positive sign”, Finance Minister Arun Jaitley today said the price situation is under control and all the macroeconomic indicators are extremely encouraging. When asked whether it was time for the Reserve Bank of cut interest rate, Jaitley parried the question saying in a lighter vein, “I am sure we all know the relationship now.”
The wholesale inflation has remained in the negative for the past nine months falling to historic low of (-)4.05 in July on cheaper vegetable and fuel. The retail inflation (CPI) too had slipped to a low 3.78 per cent during the month. Falling inflation has rekindled hopes that the RBI will cut interest rate ahead of the scheduled monetary policy announcement on September 29. Commenting on inflation, Jaitley said, “that’s a very positive sign as far as we are concerned… This speaks of the stability of economy that we are in. The inflation is under control, the manufacturing figures, IIP figures are quite encouraging, the indirect tax revenue figures are extremely encouraging. Even if you take out additional revenue measures… we still have a significant growth.”
Observing that both the time table and geographical spread of the monsoon is quite good, he said, “across the board (in) various sector, we expect a significant improvement this year. And of course this will have an impact later on the rural purchasing power.”
Speaking on the same occasion, Chief Economic Advisor (CEA) Arvind Subramanian, “I think the latest inflation numbers CPI, WPI along with other data like the growth in the deposit into the banking system, moderation in gold import, point towards not just decline in inflation but perhaps also a big structural shift in underlying process of inflation, that is something is very encouraging.”
RBI Governor Raghuram Rajan after the monetary policy announcement on August 4 had said the central bank may cut interest rate even out of the policy cycle depending on how macroeconomic indicators play out. “We are waiting for information. There was more need to move fast in the early stages of the turnaround. We will take all information into account and decide whether at times it warrants moving in between policy cycle or it does not,” Rajan had said after the policy meet.