Inflation Well Below RBI’s Expected Rate, Likely To Hit One Year Low: Poll Data Reveals

A poll conducted by Reuters India found out that retail inflation in the country has taken the slowest pace in the last one year. This is after the rupee gained a bit of strength against the dollar, recent cut in fuel taxes and lower crude oil prices in the global markets. From 3.77 per cent, the consumer price inflation has slowed down to 3.67 per cent as of October, according to a poll conducted that consisted of 35 economists in the team.

The target of 4 per cent has been set by the Reserve Bank of India for medium-term retail inflation and this falls well below the given number. Reuters quoted Shashank Mendiratta of ANZ Bank as saying, “The key factors driving inflation are muted fuel and food prices. Both factors should keep monetary policy on a slightly sombre note. But the tightening cycle has not ended yet, because there is still some upside risk to oil prices.”

Reuters quoted Shilan Shah of Capital Economics who said, “The RBI has had success in anchoring inflation expectations over the past five years. Any erosion of independence could permanently reverse this trend, affecting spending and saving decisions and wage negotiations and ultimately push up actual inflation.”

In September, the wholesale inflation fell to five per cent and the industrial output has likely increased by 4.3 per cent growth rate.