NEW DELHI: For the first time in three decades India’s inflation has entered negative territory to negative 1.61 percent, causing government officials to debate whether to cut interest rates or not.
Deputy Chairman of the Planning Commission Montek Singh Ahluwalia, dismissed any need for alarm.
“Absolutely no cause of concern whatsoever,” he said at a press conference yesterday. “We knew that it was going to appear negative for a while.”
Deflation can be harmful to the economy because it indicates a need to slow down production. So while lower prices may be good, deflation also causes more layoffs and fewer people are able to buy consumer goods.
The negative inflation rate was “unusual,” but “not unexpected,”
Finance Secretary Ashok Chawla called the steep decline in the costs of goods and services (inflation was 11.66 percent this time last year, thanks primarily to higher oil prices) “unusual” but “not unexpected.”
He also said he expected inflation to be in the red for some time to come, but “this is something that does not really lead to any major policy shift.”
