A whopping 18% fall in the price of Brent crude oil in the international market over the last three months will not just help narrow Indias twin deficits but also help arrest inflation.
Consumer inflation dropped to 6.46% in September, a 33-month low, while wholesale inflation fell to a five-year low of 2.38%. Food inflation, which has a 50% weight in the CPI, came off to 7.67% in September. Hitendra Dave, head of global markets at HSBC, points out that the data on inflation and crude oil prices should make the RBI more confident that inflation will be reined in.
The RBI aims to bring down inflation to 8% by January 2015 and 6% by January 2016. Meanwhile, non-food credit, which had hit a five-year low of sub-10% in September, has recovered marginally to 11.16%. Most bankers say that loan offtake for capital expenditure is negligible indicating that recovery in industrial growth is slow.