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Uday Kotak echoes Manmohan Singh on low inflation, warns decline in economic activity

Kotak Mahindra Bank Chairman Uday Kotak said on Thursday keeping inflation under control is good up to a point, but the country should stay alert about slipping into deflation.

In a tweet, sharing data on consumer-price inflation rate in advanced and emerging economies, Kotak says India is still far from the uncharted territory of deflation but needs to be wary.

The banker cautioned that that deflation as is happening in many countries could lead to a decline in economic activities and negative interest rates.

Inflation becoming a thing of the past? This is good up to a point, but the spectre of deflation looms in many countries which leads to declines in economic activity & negative interest rates. Unchartered territory! India still far from this, but must keep alert, he tweeted.

Inflation becoming a thing of the past? This is good up to a point, but the spectre of deflation looms in many countries – which leads to declines in economic activity & negative interest rates. Unchartered territory! India still far from this, but must keep /HySKzq9EUJ

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Kotak is not the only one who has raised the matter. Former PM Manmohan Singh recently said the Modi governments obsession with managing inflation had led to various troubles in the farm sector.

Slamming the Modi government on economy, he had said, …this government has been in office for five and half years, it should have learnt from our mistakes and provided credible solutions to those problems which are still affecting our economy, reported PTI. He also blamed the Modi government for deterioration in economic climate of the country, adding that double engine model of governance had failed.

The combined CPI inflation (rural and urban taken together) has fallen below 4% in the last two fiscals, with rural inflation touching a low of 2.99% and urban inflation touching 3.92% in FY19. RBIs official data show consumer price inflation for September has risen to 3.99 per cent, up from 3.3 per cent in August.

But inflation has seen a significant fall in the last two years. Under the inflation-targeting framework, the RBI is bound to keep the price index at 4 per cent with 2 percentage points either way.

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