With markets continuing to surge, retail inflation easing to record low and Index of Industrial Production (IIP) slowing down, the RBI is expected to be under pressure to cut interest rate in its policy decision next month.
According to data released by the Central Statistics Office (CSO) on Wednesday, factory output growth plunged to 1.7 per cent low in May due to poor performance of manufacturing even as retail inflation dipped to historically low level of 1.54 per cent in June from 2.18 per cent in May on dip in food items like vegetables, pulses and milk products.
Markets also cheered with key macroeconomic data with benchmark Nifty rising for the third straight day to close at a fresh lifetime high of 9.816.10 and the Nifty closing above the 9,800 mark following sustained buying in bank, energy, media, infra and metal counters on the back of higher global cues. Boasting of the deflationary trend on the consumer prices, Chief Economic Adviser Arvind Subramanian said, “The number of 1.54 per cent is historically low and reflects the firm and ongoing consolidation of macro-economic stability. The last time we saw such inflation — according to slightly different CPI (IW) — was in 1999 and before that in August 1978.”
He suggested that all policymakers should look at data ‘very, very carefully.
“This paradigm shift in inflationary process has been missed by all, who have made systematic inflation forecast error,” he said.