The consumer as well as wholesale price inflation dived to new lows in August on falling global commodity prices, bolstering chances of an interest rate cut by RBI.
Consumer price inflation, RBI's benchmark, eased to 3.66 per cent in August from 3.69 per cent, while wholesale prices tumbled for a tenth straight month to minus 4.95 per cent compared with a provisional (-) 4.05 per cent in July.
The dip in inflation adds to pressure on RBI Governor Raghuram Rajan to cut interest rates for a fourth time this year.
Rajan, who has so far resisted pressure from the government as well as the industry on easing monetary policy, is to announce next bi-monthly policy on September 29.
The decline in inflation has been mainly on account of moderating prices of food items with the exception of onion and pulses. This has sparked fears of deflation in the economy, which some economist argue would create further problems in the coming days.
Also of concern is drought-like situation with about half of the country witnessing deficient rainfall.
Commenting on the data, Finance Minister Arun Jaitley said: "During the monsoon period because of seasonal variations, (prices) of some products go up. But overall inflation continues to moderate and seems to be under control."
The wholesale inflation was (-)4.05 per cent in July. It has been in the negative zone since November 2014. In August last year, it was 3.85 per cent.
Price rise in onions and pulses was at 65.29 per cent and 36.40 per cent respectively during August, as per the data.
Overall, WPI food inflation basket remained in negative territory for second month in a row at (-)1.13 per cent.
According to Economic Affairs Secretary Shaktikanta Das said: "RBI will take a considered call on the issue. There is no divergence in perception. The government and RBI are working together. Taking into account the overall factors, RBI will take a considered call.
