Falling inflation positive sign, all macro data promising: FM

Falling inflation positive sign, all macro data promising: FM

FPJ BureauUpdated: Friday, May 31, 2019, 11:19 PM IST
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The official photograph of the Defence Minister, Shri Arun Jaitley. |

New Delhi : Terming the declining inflation as a “positive sign”, Finance Minister Arun Jaitley 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.”

India’s inflation rate based on the Wholesale Price Index plummeted to a record low of (-)4.05% in July from (-)2.40% in June, staying in the negative territory for the ninth consecutive month, data released by the commerce and industry ministry showed. The fall in inflation rate was due to statistical effect of a high base and across-the-board fall in prices. Retail inflation (CPI) too had slipped to a low 3.78 per cent during the month. Among the sub-groups, primary articles index declined 0.5% on month while fuel and power and manufactured products index fell 2.0% and 0.3%, respectively. Within primary articles, food articles index declined 0.6% on month, pulled down by 4.5% decline in fruits.

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.”

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.”

Since RBI wanted more clarity over inflation numbers in months to come, it kept policy rate unchanged during its policy review earlier this month.

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