Indian Economy may go into deflation by the second quarter of financial year 2009-10 as there are fears of inflation going below zero percent in the face of unprecedented fall in crude and commodity prices. If the current pace in inflation-decline continues, the figure may slide below two percent by end-fiscal.Many people may go jobless if the current trend continues. The experts say it may fall further to below zero percent by Q2 FY10.
Inflation almost halved to a nine-month low of 6.61 percent from this year’s peak of 12.91 percent, giving more space to the RBI to signal further cuts in interest rates. Deflation occurs in an economy when the negative inflation prevails for a long period. In the event of deflation, the Reserve Bank will have to enhance money supply and lower rates further to support inflation.
Inflation almost halved to a nine-month low of 6.61 percent from this year’s peak of 12.91 percent, giving more space to the RBI to signal further cuts in interest rates. Deflation occurs in an economy when the negative inflation prevails for a long period. In the event of deflation, the Reserve Bank will have to enhance money supply and lower rates further to support inflation.
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