Inflation at lowest level in more than a year

19 Feb 2009 | 12:14 Inflation at lowest level in more than a year

Inflation based on the wholesale price index rose 3.92% in the year through 7 February 2009, much lower than previous week's annual rise of 4.39%. It was the index's lowest annual rise since 3.83% on 29 December 2007.

Falling inflation has provided room for the Reserve Bank of India (RBI) to cut interest rates further to shield the domestic economy from the global financial sector crisis and recession in key global economies. RBI governor D Subbarao said on Wednesday, 18 February 2009, there is room for cutting interest rates further as the impact of the global recession on India was sharper than expected. But the question is whether rates should be cut, he said. The RBI governor was unsure about the timing and extent of the rate cut, if any.

Market men see a bigger role for RBI in the coming months to shield the domestic economy from the impact of the global financial crisis and recession in key global economies as the election code will be in force by the end of this month which means that there cannon be any policy action from the government. Once the model code of conduct comes into force after the announcement of poll dates, any announcement by the government will be subject to Election Commission's (EC) scrutiny.

The EC is likely to announce the poll date for the parliamentary elections by the end of this month. The elections are likely to be held in April-May 2009

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