Inflation to soften by September this year: Kaushik Basu

Dr Kaushik Basu, Chief Economic Advisor to the Ministry of Finance, said inflation would soften by September this year. Mr Basu, who was in Chennai on Tuesday to address a workshop on 'The Indian Economy and the Economy Survey,' also spoke about FDI in retail, the currency situation and corruption. Edited excerpts from his speech:

On Inflation

Inflation should go down from September. The September inflation, our expectation in the ministry is that it will go below 7%. However, there would be no change in the next two months and the inflation figures would remain the same. India's inflation though high is much better when compared to emerging countries.

It's been coming down very slowly and it's in a right direction but it still continues to be very high. There is no magic solution for inflation. People think it's a matter where government can simply take a decision. They think we can control prices if the government wants to do that.

In fact, my relatives keep phoning me up and say that price of this has gone up, why don't you unroll it. The presumption is that a phone call from the government and a couple of factors can lower prices. We have to do it with a combination of fiscal and monetary policy.

On FDI in Retail

(We) need to open up the retail sector to FDI. Allow FDI, so that multinationals come into this sector. This is a topic which saw huge and loud criticism. I sense that a large group would like MNCs coming into this sector. MNCs are not a Mother Teresa centre for charity.

If you think they are coming to help us then you are making a fundamental mistake. They are not coming to help India but the economic life is full of opportunities (that) when someone tries to help himself or herself that helps others as well.

The biggest beneficiaries would be the farmers because the wear and tear from farm-to-retail is astronomical in India. Because these items are packed (only) after they reach retail. If MNCs come in, supply chain management will fall into place.

On Currency

Depreciation and appreciation of rupee are very different creatures from a policymaker's point of view. My own view is that when there is rupee depreciation, it's an advantage to export and sell your goods. Whether our currency appreciates or depreciates, we complain.

That does not make sense. You can't complain both ways. The right thing to do is when you get a depreciation of this kind, pick up the opportunity and export more. China's rising wages and our weakening currency is an ideal opportunity to give an export thrust. It needs some intelligent policy measures and I feel that India should go for it.

On Corruption

India needs corruption control. For ordinary people, it's discouraging when you face a mountain of bureaucracy. I feel this is something that we should be ashamed of. Civil society activists feel if the government sends a team it will hunt down and control the layer of corruption.

But again you need to realise that if there is another layer of bureaucracy to control this layer of corruption, you give rise to another layer of corruption.