The Finance Ministry on Monday is hoping that the recent downgrade of the US will bring down headline inflation. The rating agency Standard and Poor's lowered the rating of US on Thursday which has brought down the prices of major commodities such as crude.

“It can have a dampening effect on inflation because we all have been worried about commodity prices. But we will have to watch how long this will happen,” Chief Economic Advisor, Mr Kaushik Basu, told reporters.

The 52-week average of the rate of inflation for primary articles has been recorded as 15.38 per cent. While for June, the overall rate of monthly inflation stood at 9.44 per cent.

Crude price and inflation

Now, after the S&P rating, the international price of Brent crude has come down to $107/ barrel while crude at NYMEX is hovering around $85. Experts expect more softening in the coming days.

However, Mr Basu added a note of caution. He said, “A part of the international prices has to deal with buoyancy of the Indian economy. There is softening of global prices. It might help in softening the prices here.”

Mr Basu also felt that there was no need for special measures. Some experts had earlier said that since the Government was hesitant of taking a major policy decision, added by the US event, the India growth story may be impacted more severely.

But, Mr Basu said, “We are doing fine, we don't need any special measures right now. We have a slew of instruments available with our ministries, with our Government and with RBI. Should the need arise, the Government and the central bank are in a position to step in.”

He, however, apprehended that there may be some short-term fluctuations, but he was confident that the Indian growth story remain robust in the medium- and long-run.

> shishir.s@thehindu.co.in

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