Inflation will moderate soon, say government economists

May 12th, 2008 - 6:32 pm ICT by admin  

A file-photo of P. Chidambaram

New Delhi, May 12 (IANS) Two leading government economists Monday expressed optimism that inflation would moderate soon and added that there was no need to panic. While Planning Commission Deputy Chairman Montek Singh Ahluwalia said here that the government’s efforts to control inflation would have positive results in some weeks, Prime Minister’s Economic Advisory Council (EAC) Chairman C. Rangarajan told reporters that inflation would come down to five to six percent in four months.

“The government’s initiatives to check inflation will certainly moderate the prices of commodities. It will take some time, some weeks, and there is no need to panic,” Ahluwalia said after a meeting with GMR Infrastructure to review Delhi airport’s expansion.

India’s annual inflation rate soared to a new high of 7.61 percent for the week ended April 26 from 7.57 percent the week before.

The optimism of the two experts comes at a time when the country’s rise in industrial production showed a sluggish trend.

The Central Statistical Organisation (CSO) Monday released the index for industrial production (IPP), registering 8.1 percent growth during 2007-08 against 11.6 percent in the corresponding period the previous fiscal.

Asked to comment on the slowdown in industrial production growth, Ahluwalia said eight to 8.5 percent gross domestic product (GDP) growth was still not an impossible proposition.

“Though I have not yet seen the IIP figures, the GDP growth rate of eight to 8.5 percent is quite possible during the current fiscal,” Ahluwalia said, but refused to specify any time frame for inflation to come down.

Rangarajan, on the other hand, said inflation would come down to the level of five to six percent in the next three to four months as “good monsoon” was expected and the government has already taken efforts to contain prices.

“In next three to four months, inflation is likely to reduce to six percent, and may finally settle between five and 5.5 percent, depending upon the monsoon and (the growth in) other sectors,” Rangarajan said here on the sidelines of an international conference on tax.

“I think much will depend upon the monsoon, and the way the output behaves. It is possible to go down to five to 5.5 percent,” he said, adding that the crude oil having crossed $120 per barrel in the international market was a matter of concern.

The price index released by the ministry of commerce and industry Friday showed increase in prices of tea (11 percent), condiments and spices (three percent), fish marine (two percent), fruits and vegetables (one percent).

Finance Minister P. Chidambaram Friday said “more administrative measures will be taken if needed”, adding that inflation was nowhere moderating in the world.

In the recent past, the government has taken a slew of measures like banning the export of rice and pulses, cutting import duty on several edible oils and other stuffs. A few administrative measures like ban of futures trade on potato, gram, soybean, and rubber have also been taken to rein inflation.

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