While Critics Pummel Misleading IIP, Inflation Hits A One Year Low

According to a recent poll conducted by Reuters, inflation in India is expected to have reached a one-year low in September as good monsoon rain has given a much-needed boost to the agriculture sector while helping in keeping food prices low.

The favourable impact of the monsoon is now coming through the system. We saw quite a strong deflation in terms of food prices in August. We expect that to continue in September as well," Reuters quoted Tushar Arora, senior economist at HDFC Bank, as saying.

After inflation hit a five-month low in August, the Reserve Bank of India cut the repo rate by 0.25 percent during the recent Monetary Policy Review.

‘The latest poll of over 30 economists showed retail inflation probably eased further last month to 4.80 percent, the lowest since September 2015, from 5.05 percent in August,’ the report claims.

If the inflation continues to remain low, as the report suggests, RBI may go ahead with further rate cuts in the coming time. The rate cuts, in turn, will help government efforts to achieve a growth rate of about 8 percent.

As already seen, RBI has loosened its timeline for meeting its inflation goals and has lowered real interest rates to make way for further cuts.