The rate of Inflation in India is going down and it is nearing zero. As at the end of the week ending on 07th March 2009, the WPI -based rate of Inflation was 0.44%, a record low.
Will the rate of Inflation still go down and will a negative Inflation prevail in India?
Is negative Inflation the same as deflation?
Should India fear for Deflation?
Even though the inflation is reducing why the consmer prices are not reducing proportionately?
The above will be some of our doubts on observing the reducing rate of inflation.
According to Financial experts, deflation will occur when demand contracts and not just slows. India is at a point when inflation may turn negative in coming weeks. But the economy as a whole continues to grow, even though at a slower pace. Therefore, it is disinflation/ negative inflation rate but over-all demand not contracting and not deflation that India is looking at.
The Government of India and Reserve Bank of India will have to take more aggressive steps to stimulate the economy.