Cut in fuel price to ease inflation?

The inflation in India has been increasing for consecutive two week. Now the inflation is at 5.64 per cent from 5.6 per cent. The rise in the inflation however may be a cause of concern for the economy. But the cut in the fuel price by the government of India would ease the inflationary pressure.

The finance ministry said reduction in fuel prices would lower inflation by 100 basis points, though some economists said the fall will be 40 basis points. On the other hand, the RBI has urged the banks for lower their interest rates in order to tackle the situation.

The RBI did not change the interest rates while recently reviewing the its credit policy. The truckers strike would have caused the rise in the inflation and the cut in the flue prices may reduced the inflation rate.