Mint Quick Edit | Inflation surprise: Aim for predictability

6 months ago 10

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Monsoon rainfall has resumed after an early pause and its coverage has widened, which should help keep a lid on food prices. (Pexels)

Summary

India’s cost of living went up just 2.1% last month. Amid this heartening run of price relief, can we hope for sustained stability? It would serve as a macro foundation for the economy’s swift and safe emergence.

Although a dip was expected, the scale of it has come as a surprise—a pleasant one at that. Consumer inflation in June fell to an over six-year low of 2.1% from a year earlier, compared with 2.8% in May, according to data released by India’s government on Monday.

Also Read: Mint Quick Edit | Low inflation: Stoking high hopes?

This was thanks mainly to food prices, which fell 1.06%, driven by vegetables and pulses. Monsoon rainfall has resumed after an early pause and its coverage has widened, which should help keep a lid on food prices.

Also Read: Mint Quick Edit | An inflation dip enlarges RBI’s policy space

Externally, crude oil prices have been calm since the end of Iran-Israel hostilities, spelling its own bit of relief. If India’s current run of price stability lowers inflation expectations among retail consumers, it could combine with the tax cut offered by the Union budget to stoke spending. In turn, this could draw greater private investment in capacity creation to meet demand, thus boosting economic growth.

Also Read: Mint Quick Edit | Will inflation relief spell a stable rupee this year?

Soft domestic demand has been a dampener that India’s economy has been struggling to escape. Low and stable inflation has multiple benefits in the world of finance too. A reliable assurance that the currency will only lose its purchasing power at a predictably tolerable rate holds considerable long-term value.

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