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CPI data shows paradigm shift to low levels of inflation: CEA (Lead)

New Delhi, July 12 (IANS) With the retail inflation easing to a record low of 1.54 per cent in June, the government’s Chief Economic Adviser Arvind Subramanian on Wednesday said it reflects a paradigm shift in the process to low levels of inflation, which has been missed in the large systematic inflation forecasts made.

“This low, heartening number is consistent with our analysis for some time now — and which will be fully elaborated in the forthcoming Economic Survey — of a paradigm shift in the inflationary process to low levels of inflation, a shift that I think has been missed by all reflected in the large, one-sided, and systematic inflation forecast errors that have been made,” Subramanian told reporters here.

As per the Central Statistics Office (CSO) data on Consumer Price Index (CPI), retail inflation was dragged lower to 1.54 per cent in June due to a sharp fall in the prices of food items like pulses, vegetables, and other perishables. The current inflation rate is the lowest since the series began in 2012.

“The last time we saw such inflation according to a slightly different CPI series — Consumer Price Index for Industrial Workers (CPI-IW) — was in 1999 and before that in August 1978,” the Chief Economic Adviser said.

The number of 1.54 per cent is historically low and reflects the firm and ongoing consolidation of macro-economic stability, he said.

“Clearly, this low number and what it implies about underlying price pressures, as well as the latest IIP data just released, is something that, I am sure, all policy makers will reflect upon very very carefully,” he added.

The June retail inflation rate fell when compared with May, when it prevailed at a higher rate of 2.18 per cent.

On a year-on-year (YoY) basis, the country’s June retail inflation was lower from 5.77 per cent CPI rate reported for the corresponding month of last year.

The other key macro-economic data — Index of Industrial Production (IIP) — released by the CSO showed that on a sequential basis, the output rose slower than the revised estimates for April 2017.

The growth estimates for April 2017 were revised to 2.79 per cent from 3.1 per cent.

The factory output, as per the new IIP with revised base year of 2011-12, grew only by 1.7 per cent during May over the corresponding period of last year.

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