4:27 am - Saturday August 2, 2014

Monsoon brings some relief in inflation

In some relief for the consumers in India, the inflation has slowed down to its lowest level in the month of June 2012 with the moderation in the fuel prices. This added pressure to the business leaders for a cut in interest rates as well as fuel subsidies so as to help revive the lustre in the economy.

The whole sale price index went down to a lower level than expected to annual 7.25 percent in the month of June, 2012. This was the slowest rise since the month of January after a drop in the prices of some of the fuel items.

But now the monsoon has helped in bringing down the prices of food and has tempered the expectations of the rate cut. Even the government had warned that the inflation could accelerate the if there wasn’t any rain.

Shubhada Rao, the Chief economist at Yes Bank in Mumbai said, “I do not expect this number to prompt the RBI to immediately cut rates”. And added, “The inflation expectation still remains elevated, and the outlook is cautious because of the performance of monsoon, and its impact on food prices, as well as the impending and much awaited hike in fuel prices.” Meanwhile the country is constantly dealing with constant fluctuation in the rupee value against US dollar.

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