Oil price slump helps stem India inflation
12/11/2014 12:16
The sharp fall in oil prices and other global commodity prices has come as a much needed boon for the Indian economy which has been battling the persistent problem of high inflation, raising optimism over sooner than earlier expected monetary easing by the Reserve Bank of India (RBI).
“Whatever assumptions we made in terms of oil prices and other commodity prices, subsequently what we see now is that the prices have come off even more. So, the disinflationary process would see a bit stronger than what the last policy had done”, said RBI Executive Director Deepak Mohanty, PTI reported.
The price of Indian crude basket now stands at around USD 81 per barrel compared to USD 108.05 per barrel in May, heling to lower the government’s subsidy burden and trimming the fiscal and CAD shortfall.
At the same time, lower cost oil imports has pushed wholesale inflation to five-year low of 2.38 per cent in September 2014 while consumer inflation, the most watched gauge of the RBI retreated to 6.46 per cent in September 2014 from a revised 7.73 per cent in August 2014. More than 70 per cent of India’s oil needs are met through imports.
While the RBI is likely to resist cutting rates in its December meeting, a February rate cut is on the cards given that the central bank is on target to undershoot its 8 per cent consumer inflation target for January.
12/11/2014 12:16
The sharp fall in oil prices and other global commodity prices has come as a much needed boon for the Indian economy which has been battling the persistent problem of high inflation, raising optimism over sooner than earlier expected monetary easing by the Reserve Bank of India (RBI).
“Whatever assumptions we made in terms of oil prices and other commodity prices, subsequently what we see now is that the prices have come off even more. So, the disinflationary process would see a bit stronger than what the last policy had done”, said RBI Executive Director Deepak Mohanty, PTI reported.
The price of Indian crude basket now stands at around USD 81 per barrel compared to USD 108.05 per barrel in May, heling to lower the government’s subsidy burden and trimming the fiscal and CAD shortfall.
At the same time, lower cost oil imports has pushed wholesale inflation to five-year low of 2.38 per cent in September 2014 while consumer inflation, the most watched gauge of the RBI retreated to 6.46 per cent in September 2014 from a revised 7.73 per cent in August 2014. More than 70 per cent of India’s oil needs are met through imports.
While the RBI is likely to resist cutting rates in its December meeting, a February rate cut is on the cards given that the central bank is on target to undershoot its 8 per cent consumer inflation target for January.
