The rate of inflation, which has turned a negative1.61 for the first time in thirty years, is in fact a positive sign and should not be termed as deflation as it essentially reflects a high base effect of the previous year.’ What is welcome is that a substantial proportion of the current fall in inflation is due to a lowering of fuel and commodity prices as compared to the same period last year. This would lower the input cost of corporates and help industry become cost competitive in the current situation of slackening demand”, said Mr. Krishan Kalra, Secretary General, PHD Chamber.

“The negative trend of inflation is likely to continue till August 2009 after which the impact of the high base effect is likely to wear off. It may be recalled that during the same period last year the global crude prices had escalated to a high of $147 per barrel and inflation had touched 13 %. What is more, the prices of primary articles have not come down and continue to be worrisome”, added Mr. Kalra.

The decline in inflation should pave the way for further interest rate cut by RBIwhich in turn would help to revive industry which is impacted by shortfall in credit and infuse liquidity in the market.

“It is important that a suitable policy is formulated to help industry overcome the shortfall in demand. Priority should also be given to pump priming the economy through investment in infrastructure.  Besides, monetary and fiscal policy should be accompanied with the implementation of unfulfilled agenda of reforms to help economy and industry to tackle the prevailing situation of slackening demand”, further said Mr. Kalra.

Anjula Singh Solanky
Dy. Secretary-Media Relations
PHD Chamber of Commerce and Industry