Kolkata, Dec 19 (IANS) Measures like de-hoarding and imports of selective items can tame the country’s soaring food inflation, a senior finance ministry official said Saturday.
“Inflation is a concern. The inflation is not by aggregate excess demand. So there is no great need to pull back on aggregate excess demand, which would have caused the growth rate to drop,” Chief Economic Advisor Kaushik Basu said.

Inflation has to be corrected primarily through interventions in the food market, which should not dampen the aggregate growth impetus of the economy, he added.

“There is a concern about hoarding. One can bring in measures there and one can begin imports of certain products,” said Basu, who was here to attend the annual reunion of Alumnorum Societas (St. Xavier’s School Old Boys Association).

“Huge import intervention is not possible for every product simply because India is a big country and there is limit to buying from the global market. But still, through a combination of de-hoarding and import interventions, it is possible to dampen the inflationary tendency in the food sector,” he contended.

On what role the Reserve Bank of India should play, he said: “The concern has been whether the fiscal and monetary policy should be used to control the inflation and I think the general view is that in a very mild way, you need those kinds of interventions. Right now, you need very sector-specific interventions to correct food inflation.”

However, Basu said mild corrections in interest rates would improve the situation. “I think if there are (interest rate) corrections they would be very mild corrections. Again, I expect there to be no affect on growth right now.”

“There is some inflation where money supply has gone out of control. You have to have interest rates being raised and repo rates being raised to wrap that back. But right now, we are not in that situation. At most there is a mild correction.”

Wholesale food prices have touched a 10-year high, with food inflation at 19.95 percent for the week ended December 5.

Basu said inflation “is definitely a concern because the poorer sections and the middle class tend to get affected very badly by food inflation”.

He also said a certain amount of restructuring is needed at the bureaucratic level and costs should be brought down.

“I personally believe that it needs a certain amount of restructuring. Government structures have to be rethought. I plan to work on that and I think cutting down bureaucratic costs can have a huge multiplier effect on the Indian economy. But that is not something that can be done through one announcement… it will need taking stock of how bureaucratic decisions are made,” he maintained.