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Inflation at 20-year low; will it hurt us?

March 19, 2009

Inflation in India drastically fell to a two-decade low of 0.44 per cent in the first week of March as food and fuel items turned cheaper, prompting analysts to say that rate of price rise would soon turn negative.

Wholesale price-based inflation declined by 1.99 percentage points from 2.43 per cent during the week ended February 28, fuelling expectations that the Reserve Bank of India would cut interest rates to spur the economic growth.

After a year of spiraling prices, rising inflation, India is now heading towards deflation. The Indian economy may go into deflation by April as inflation is likely to fall below zero per cent. So what is deflation and why is it bad? Read on. . .

Text: Rediff Business Desk, with PTI inputs

Image: A labourer arranges pineapples at a wholesale fruit market in Siliguri. | Photograph: Rupak De Chowdhuri/Reuters

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