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MUMBAI: With inflation fast approaching zero per cent, bankers have sought to allay fears that the country may be in the deflation mode on grounds that the consumer price index was still high and deflation was a statistical phenomenon due to base effect. Deflation happens in the economy if negative inflation sustains over a period of time.
"Deflation is unlikely to have any major impact on the economy. Negative inflation, if it happens, will occur mainly on account of declining oil prices, easing monetary policy. It is unlikely to stay long," IDBI bank chief financial officer RK Bansal said. Inflation, now at 0.27%, is unlikely to stay below zero for more than one-two weeks. This will not have any major impact on demand as the consumer price inflation is still high, Bansal said. "It (deflation) is unlikely to remain long and affect the common man," Bansal said. India's inflation started declining to historic lows after the Reserve Bank started to aggressively reduce its policy rates. Citibank chief financial officer Abhijit Sen echoed a similar view saying that a declining inflation was a reflection of slowing economic growth and easing of monetary policy.