Experts believe this particular phase of inflation is likely to last for about two months since WPI climbed rather steadily last year after the fuel price hike because of its second-round effects. “So, depending on how fast WPI can catch up with its year-ago levels, we’ll see negative inflation till at least mid-end July,” Sen said.

This deflation is also not of any serious concern to the economy since month-on-month inflation is still positive, which means that prices are still rising. A steady rise in commodity prices and improvement in the global economy could actually fuel inflationary pressures by the year-end and prompt the RBI to raise rates.

Negative inflation, however, need not necessarily translate to easing of interest rates as the industry has been expecting for some time. Sen feels there is a need to wait for investment demand to pick up at the current interest rates before going in for another cut.

Some economists believe this phase of deflation is actually good for the economy as it means that the prices of inputs and intermediate goods are falling more rapidly than those of finished goods, which will only help the manufacturing sector cope with falling output seen over the past few months.