India inflation to be near zero for 3 months

[Naveed Yaseen]

NEW DELHI: Monetary policy was key to reviving the Indian economy, with wholesale price inflation set to remain near zero for the next three months, Arvind Virmani, the finance ministry’s chief economic adviser, said on Tuesday.

He said economic growth in the fiscal year ending March 31 was likely to be close to 7 per cent after farm data is updated.

Virmani said monetary policy had to work in tandem with fiscal stimulus to lift sagging demand and growth.

“In a demand depression, monetary policy is the first line of defence. Whatever we said here (in the half-yearly review report), still applies,” Virmani told Reuters in an interview.

Since October, the central bank has cut its key lending rate by 400 basis points. The government has cut factory gate duties and service tax rates to protect growth and jobs.

The government has forecast growth of 7.1 per cent in 2008/09, but private analysts expect it to be lower after some dismal factory output and export data in recent months.

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