Inflation to stay below RBI's target of 4%: Economy Survey

In a first, the government today presented second or mid-year Economic Survey for 2016-17, highlighting newer factors the economy faces.

The Survey said the fact that current inflation is running well below the 4 percent target suggests that inflation by March 2018 is likely to come in below the RBI?s medium term goal of 4 percent.

It dubbed the current low level of inflation "a historic moment", instilling confidence in price stability.

According to the Survey, CPI inflation declined to 4.5 percent during 2016-17, with a broad-based price decline in all major commodity groups. It has been below 4 percent for the past eight months.

It noted that the economy underwent a transition -- possibly, structural and permanent -- from high to low inflation in the last three years.

"Significant moderation in CPI headline inflation during the last three years. CPI inflation fell to a series low of 1.5 percent in June 2017," the Survey noted.

Noting that most states and UTs saw a sharp decline in CPI inflation in 2016-17 compared with the previous year, the document stated, "Both rural and urban inflation declined in 2016-17 and the gap between rural and urban inflation has narrowed in recent months."

In sum, the Survey pointed out that geo-political risks are simply not as risky as earlier.

"Technology has rendered India less susceptible to the vicissitudes of geo-economics (OPEC) and geo-politics (the Middle-East)," it added.