The Chief Economic Advisor, KV Subramanian, on Friday hoped that the monetary authority will take note of the possible trends in retail inflation before taking a call on policy rate revision.
MPC meeting
The Monetary Policy Committee (MPC) is scheduled to meet between March 31 and April 3 to review the macro economic parameters and policy rates.
Meanwhile, the rate of retail inflation, based on the Consumer Price Index (CPI) for February, was down 6.58 per cent from 7.59 per cent in January. With crude prices in the international market still below $40 a barrel, expectations are that the rate of retail inflation will come down further.
“Inflation data seems to be clearly suggesting that there is moderation in inflation. And as I had mentioned earlier as well, by July, we expect the headline to come back to core with the decline in vegetable prices.
“Core inflation itself actually seems to have gone down, and we would expect it to go down further in the future because of the decline in the oil prices. I think there is scope for the central bank to consider the different aspects,” said Subramanian here while reacting to the huge volatility in the stock market on Friday.
Post slump in the US market on Thursday, the Indian stock market opened on very weak note on Friday.
Panic selling dragged both key indices, BSE Sensex and NSE Nifty, down by more than 10 per cent in opening trade itself, forcing the authorities to apply lower circuit breaker and stopped trading for one hour. This happened almost after a gap of 11 years, though on earlier occasion it was the upper circuit. Subramanian emphasised that the current developments in the markets are related to global factors. Between January 31 and March 12, countries such as Russia, Brazil, France, Germany, Argentina, UK, US and Japan have had more than a 20 per cent decline in their stock prices in the stock markets and India is actually is below them.
“What we are seeing currently is actually a reflection of some of the global factors related to the coronavirus episode,” he said.
Highlighting improvements in macro economic fundamentals of the Indian economy, he said that retail inflation is down, industrial production is showing moderation, current account deficit is down, and foreign exchange reserve is almost half- a-trillion dollars.