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Kaushik Basu on inflation- Ravi V. Chhabra



Nation’s Inflation




Kaushik Basu: Puffiness

reprieve in sight

fnbworld bureau/Ravi V. Chhabra


Do the common folk of India figure prominently in the Government’s economic growth agenda? Here’s fnbworld’s peek into the trends for food inflation in the country: The Finance Ministry\'s Chief Economic Advisor Dr. Kaushik Basu doesn’t mince words, as he says, a fall in inflation would happen after three months of fluctuation and rise again in June due to the base effect.

Dr. Kaushik Basu recently told journalists in Kolkatta: “For the next three months, there will be fluctuating trend in inflation following which it would see a fall,” the manufacturing sector and non-food items, especially metals on account of hardening global prices. On a monthly basis, iron and steel prices surged 11.40 per cent in April while basic metal alloys and metal products turned 6.72 per cent dearer. The spread of inflation to non-food  products is also evident in cotton textile prices rising by 15.66 per cent and chemical products turning more expensive by 5.67 per cent.

The WPI (wholesale price index) data released here on Friday, May 14, for the month showed that even as the provisional inflation figure for April at 9.59 per cent marks a decline from 9.90 per cent (provisional) in March and 10.06 per cent (revised) in February this year, the fall is partly due to the rising base effect. In April 2009, inflation was pegged at 1.31 per cent, slightly higher than 1.2 per cent in March that year.

Finance Minister Pranab Mukherjee said recently: “I will not be surprised, if the inflation reaches double digits in March,” he had said in Parliament. The only difference is that the breaching took place a month earlier in February as against the RBI (Reserve Bank of India) projection of 8.5 per cent for the end of the fiscal.

Meanwhile, commenting on the inflationary trend, Chief Statistician Pronab Sen said: “Fear of food inflation spreading to other sectors is still there. It will take a little bit of more time for it to come down. I hope inflation would see a declining trend hereafter.” The general expectation is that headline inflation would start to wane during the year and fall to 5.5 per cent by March next year, as has been projected by the RBI for the current fiscal. An imperative for it being that the monsoon is normal and food prices come down.

As of now, the April inflation data manifests that potato prices fell 28.70 per cent during the month while onion prices also dropped 11.62 per cent. Sugar prices fell 5.74 per cent on a monthly basis, but were dearer as compared to last year. The prices of pulses went up by 2.47 per cent and milk by 2.96 per cent during the month while on a yearly basis, they were higher by 30.42 per cent and 21.95 per cent.

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