Thaindian News

Kolkata, Nov 4 (IANS) Conceding that the current high inflation is “very painful”, the government’s Chief Economic Advisor Kaushik Basu Friday said the double-digit food inflation will show a steady decline from the third week of December, while overall inflation, close to double digits now, will come down to about 7 percent at the end of this fiscal.

“I expect that the food inflation data that you will begin to get from third week of December will show a very steady decline. So bear with it for another six or seven weeks and after that you will see a decline in food inflation… specifically from the third week of December you will see a steady decline in inflation,” Basu told reporters on the sidelines of a programme organised by the Heritage Group of Institutions here.

Food inflation soared to a nine-month high despite aggregate monetary tightening by the Reserve Bank of India (RBI). Data released by the commerce and industry ministry showed the Wholesale Price Index (WPI) for food articles rose to 12.21 percent year-on-year in the week to Oct 22, compared with 11.43 percent in the previous week.

“My rough calculation is that we will end the fiscal year at about seven percent over all inflation (WPI),” Basu said.

Stating that it was increasing difficult for the country’s central bank to rein in inflation by monetary policy due to globalisation, where money is travelling from one country to another, he said: “We want to calibrate the fiscal policy and monetary policy together. We will go for fiscal tightening. And also monetary tightening should be done along with that.”

He said fiscal consolidation was also extremely important to contain the rising inflation and the finance ministry was very serious on keeping the fiscal deficit under control.

“We want to keep the fiscal deficit very close to our target of 4.6 percent,” he said.

Basu, however, said the government did not want to take very harsh measures to control inflation as it would eventually lead to unemployment.

“We realise that this is a difficult situation. It is not that we are deliberately sitting back and allowing the prices to rise. We just being very, very cautious…we do not want the factories to be closed down and the working population of the country is hurt by rash inflation control movement,” he added.