(Bloomberg) -- India's policy makers are hailed for slaying the inflation dragon. But there's a dark side to that success.
After posting double-digit inflation rates at the start of the decade, consumer-price growth has steadily declined over time to hover around 3% now. While much of the recent slowdown was due to a slump in food prices, businesses are starting to worry that the data is signaling a worsening in the economy's growth outlook.
Anand Mahindra, chairman of India's largest tractor and SUV maker Mahindra & Mahindra Ltd., said on Monday low inflation isn't always a good thing.
An economy with moderately high inflation “signals growing consumption and spurs investment,” he said in a Twitter post. “Some pump-priming via lower interest rates and measures to increase consumption may help.”
Mahindra's comments were in response to a report on Monday that wholesale prices rose at the slowest pace in almost two years in June. Figures on Friday showed consumer-price inflation accelerated to 3.18% in June, though remained below the Reserve Bank of India's medium-term target of 4% for an 11th straight month.
Read: INDIA REACT: Core Inflation Keeps Slowing, RBI to Ease More
Core inflation, which strips out volatile food and fuel prices, and is seen as an indicator of demand in the economy, slowed to an almost two-year low of 4.1% in June.
--With assistance from Ashutosh Joshi.
To contact the reporter on this story: Anirban Nag in Mumbai at anag8@bloomberg.net
To contact the editors responsible for this story: Nasreen Seria at nseria@bloomberg.net, Anto Antony
©2019 Bloomberg L.P.
Low inflation's often a good thing. But like blood pressure, it may not always be a sign of health if it keeps falling. Moderately high inflation signals growing consumption & spurs investment. Some pump-priming via lower interest rates & measures to increase consumption may help https://t.co/pnSIaidYJF
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