Reacting to the historically low level of retail inflation at 1.54 percent in June, Chief Economic Adviser (CEA) Arvind Subramanian has said that record low inflation was a paradigm shift in the inflationary process which has been missed by all and that the latest IIP and CPI data will surely be taken note by policy makers.
Subramanian said, “This unusually and hearteningly low number is consistent with our analysis for some time now. The number of 1.54 per cent is historically low and reflects the firm and ongoing consolidation of macroeconomic stability. He said that it’s a shift that I think has been missed by all reflected in the large, one-sided and systematic inflation forecast errors that have been made”.
The Reserve Bank, which mainly factors in retail inflation to arrive at its monetary policy, is slated to meet in early August to announce the next bi-monthly policy rate. RBI, in its last monetary policy review on 7 June, kept key interest rates unchanged but lowered the statutory liquidity ratio by 50 basis points (bps) to 20%.