No fear of sustained deflation: RBI Governor

Friday, March 27, 2009 at 2:03 am

As inflation touched a 20-year historic low at 0.27 per cent for the week ended March 14, Reserve Bank of India Governor Subba Rao said that there is no fear of sustained deflation.

Prime Minister Dr Manmohan Singh also dismissed fears that the country is heading towards deflation.

Addressing the media, the governor said, “There is no fear of sustained deflation in India. India’s economic recovery will be sharper and swifter than rest of world.”

Positive words from the RBI governor comes even as the Sensex crossed the 10,000 mark for the first time since January 2009.(Read more)

The fall in inflation is largely due to a decline fuel prices and in commodity prices such as sugar and iron. This will give room to the RBI to take further monetary steps to spur the economy.

This is the lowest inflation rate since annual records started in 1977/78 and comes 7 & half months after inflation crossed a lifetime high of 12% last July. (Read more)

Economy won’t slip into deflation: Ahluwalia

Planning Commission Deputy Chairman Montek Singh Ahluwalia on March 26 said the Indian economy is not heading towards deflation despite inflation nearing the zero-level in the past few weeks.

“I don’t think we are heading towards deflation. It is true that inflation rate has come down. This is because at this time last year, there was a sharp increase in prices,” Ahluwalia told reporters on the sidelines of the 41st annual convocation of Acharya N G Ranga Agricultural University in Hyderabad.

He further said that the inflation rate would go down very sharply. “It can go to zero or may even be negative for a week or two. It has happened in the past during 1970s the inflation rate became negative for a brief period. But I don’t expect that there would be deflation at all now,” Ahluwalia added.

On rise in crude oil prices recently, he said it was an indication of recovery of global economy and that as per the estimates, industrialised nations would see a shrinkage in 2009 by 3 per cent, compared to the previous year.

“Estimates are that this (economy) would stabilise by the second-half of 2009,” Ahluwalia said.

(With inputs from Agencies)

( This post is from an independent writer. The opinions and views expressed herein are those of the author and are not endorsed by APakistanNews.Com.)

No fear of sustained deflation: RBI Governor

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