Inflation dips to record low

New Delhi: Retail and wholesale inflation fell to new lows in August, brightening the possibility of RBI conceding to corporate India’s demand for reducing its key interest rate.

RBI governor Raghuram Rajan, who has so far resisted pressure from the government as well as the industry on easing monetary policy, is to announce next bi-monthly policy on September 29.

Inflation based on Wholesale Price Index has plunged to a historic low by contracting 4.95 per cent in August on cheaper commodities.  It has been in the negative zone since November 2014.

Also Read: Cooling inflation in India boosts expectations for more rate cuts

Retail inflation too fell to a new low of 3.66 per cent in August due to a slower rate of price rise in vegetables, fruits and protein items, except pulses. Finance Minister Arun Jaitley said overall inflation is moderating and the price situation is under control. “During the monsoon period because of seasonal variations, (prices) of some products go up. But overall inflation continues to moderate and seems to be under control,” he said.

Mr Jaitley said that “inflationary pressures” continued to ease “across-the-board in August 2015”. Chief Economic Advi-sor Arvind Subram-anian said the key point in the data is that the core momentum has decelerated over the last three months “so that’s also an encouraging sign of abetting inflationary pressures”.

“Although the extent of global volatility post the US Federal Reserve’s rate decision later this week remains critical, today’s CPI data lends support to the expectation of a repo rate cut in the RBI’s upcoming policy review,” said ICRA, senior economist, Aditi Nayar.

“RBI will take a considered call on the issue. There is no divergence in perception. The government and RBI are working together. Taking into account the overall factors, RBI will take a considered call,” economic affairs secretary Shaktikanta Das said.