Inflation in India drastically fell to a new 20-year low of 0.27 per cent for the week ended March 14, from 0.44 per cent in the previous week, as food and fuel items turned cheaper, prompting analysts to say that rate of price rise would soon turn negative.
The sharp fall in inflation has fuelled expectations that the Reserve Bank of India would cut interest rates to spur the economic growth.
Yet, despite declining inflation, prices of commodities have not really dropped. Arvind Virmani, chief economic adviser to the finance ministry, on Wednesday said that the retail price-based inflation, which is ruling above the wholesale price index, will come down with a lag but would not fall as much as the rate of rise in wholesale prices is falling.
"I expect consumer price index also to come down with a lag but I don't think it will go down to a level we see in the WPI," Virmani said.
He said that he does not expect wholesale price index (WPI) in March 2010 to be lower than March this year. "We have been saying that industrial growth is weak and inflation is coming down. That has certain implications for the policy, which the Reserve Bank of India will take account for," Virmani added.
