The historically low level of retail inflation at 1.54 per cent in June reflects the firm and ongoing consolidation of macro-economic stability, Chief Economic Adviser Arvind Subramanian said on Wednesday, suggesting that all policy makers 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, apparently referring to the Reserve Bank of India which has kept the key policy rate unchanged so far this year citing pricing pressures.
He said that last time India saw such inflation -- according to a slightly different difference CPI series (IW) -- was in 1999, and before that in August 1978.
"Clearly, this low number and what it implies about underlying price pressure -- as well as latest data on the IIP data just released -- is something that I am sure, all policy makers will reflect upon very very carefully," he told reporters.
Industrial output growth slumped to 1.7 per cent in May from 8 per cent a year-ago due to poor performance of mining and manufacturing.
"The latest CPI number for June is 1.54 per cent and it is historically low and reflects the firm and ongoing consolidation of macro-economic stability," Subramanian said.
"This low, heartening number is consistent with our analysis for sometime now -- and which will be fully elaborated in the forthcoming survey -- of a paradigm shift in inflationary process to low levels of inflation -- a shift that I think has been missed by all reflected in large, one- sided and systematic inflation forecast error that have been made," he added.
Retail inflation hit a new level of 1.54 per cent in June on dip in food items like vegetables, pulses and milk products.
The Reserve Bank, which mainly factors in retail inflation to arrive at its monetary policy, is slated to meet in early August to announce the next bi-monthly policy rate. The last policy review was in June.
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