Fall in Inflation Expected by April

• Friday, March 12th, 2010

“With better food production inflation will die down,” said chief Economic Advisor Mr. Kaushik Basu. He speculated that the good crop will reduce inflation by April.

He said, “Food inflation is high, it’s a concern. My own expectation is by April-May, the base effect would have gone.” He added that the current fall in the prices of some food products is due to the necessary actions taken by the government. It is being estimated that average inflation for the year 2009-2010 will stay around 4%.

Mr. Basu had earlier said that the rise in oil prices will cause a mild increase in the WPI inflation. But this will benefit the prices in the long run as a smaller fiscal deficit will control inflation. The price of fuel like diesel and petrol have gone up due to the tax reforms announced in the budget for the year 2010-2011. As a result, the WPI increased by 0.4%.
The Government has increased the customs duty on diesel and petrol. It has gone up to 7.7% from 2.5%. The excise duty on non-branded diesel and petrol was also increased by Re. 1.

On the other hand, in his speech in Rajya Sabha on the issue of price hike, Namo Narain Meena who is the Minister of State for Finance said that the price rise of various items can possibly be because of the anticipation of a shortage of food items caused due to unpredictable southwest monsoon.

But Meena added that the government is taking many steps to control the rising prices of food items. The steps include reducing the import duties on essential items like sugar, rice, wheat, edible oil and pulses to zero.

Government has also given permission to sugar import under open general licence at zero import duty. Meena added that the government will distribute one million tone rice and two million tonne wheat among retail consumers by allocating them to states throughout the country. This would be done by over the normal public distribution system.

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