INDIA INFLATION SLOWS TO LOWEST LEVEL IN MORE THAN 2 YEARS

Yearly prices of food decreased 0.52% in January from a 0.74% rise in December, it happen because helped by supplies of vegetables increased. Nevertheless, price of protein-rich food items stood high. Due to the food prices fallen, central bank have to cut rates in order to prevent economic slowdown. The slow inflation growth had become good news as according to Indian policymakers where they had been struggled for high prices in the past two years. In fact, the India’s economic suffer the slowest growth for the past three years. As it was expected from the Reserve Bank of India (RBI), the economy had been stimulated in which RBI begins to cut the interest rate on the first quarter of April 1st. Furthermore, in year 2012, the economists forecast that RBI would cuts the policy rate from 100 basis points up to 50 basis points for the next quarter April to June. There was a decreased in the India’s federal bond yield from 8.79 percent to 8.18 percent for the 2012 bond yield. Besides, the prices of the food had decreased up to 0.52 percent from 0.74 percent. It happens because of the increased in the supplies of vegetables. On the other hand, the prices of the protein food like fish, meat, milk, and eggs still expensive in which it was argued to become the problems. The other area like petrol prices remains constant due to the political considerations that government adjusts for the petrol and coal prices. Thus, government reduced their subsidy bill to prevent the risk of increase in the inflation. This decision that government make is to keep the policy rate unchanged associate with the risk of inflation, crude oil prices, and the weak rupee. Last year, the fall in rupee of 16 percent against the dollar had caused fiscal deficit. It means that, the