Inflation to come down by April: Chief Economic Advisor

NEW DELHI: Chief economic advisor Kaushik Basu on Tuesday said inflation would cool down by April following good agricultural production.

“With better food production inflation will die down. Food inflation is high; it’s a concern. My own expectation is by April-May the base effect would have gone,” Mr Basu said. The government has taken action and that is why we are witnessing some decline in food prices, Mr Basu said, adding that the overall average inflation will be around 4% for 2009-10.

Earlier, he had said though fuel prices would lead to a marginal rise in the wholesale price infaltion, however, a lower fiscal deficit in the long-run will dampen the average inflation. Changes in the tax structure announced in the Budget 2011 have caused fuel prices to go up. The WPI will rise by 0.4 percentage points due to the fuel hike.

The government had hiked customs duty on petrol and diesel to 7.5 % from 2.5% while excise duty was raised by Re 1 on non-branded (normal) petrol and diesel.

Meanwhile, Minister of State for Finance Namo Narain Meena in a reply to query in the Rajya Sabha said the hike in prices of items could be attributed to expectations of supply-side constraints of food items, especially due to unfavourable Southwest monsoon.

The government has taken several measures to check infaltion in food items, including reducing import duties to zero for rice, wheat, pulses, edible oils and sugar, Mr Meena said.

Besides, the government allowed import of raw sugar at zero duty under open general licence, he said. Two million tonne of wheat and one million tonne of rice have been allocated to states for distribution to retail consumers over and above normal public distribution system allocation, he added.