Kolkata, Feb 4 (Calcutta Tube/ IBNS): India’s surging inflation is likely to cool substantially and come down to seven percent by the end of March this year, Montek Singh Ahluwalia, deputy chairman of Planning Commission told reporters here on Friday.
The country’s inflation, now at about 8.5 percent, is facing stiff pressure from a bold food inflation that rose for the second consecutive week riding on stiff onion prices.
Picked up by the Opposition as one of the tacks against the ruling Congress-led United Progressive Alliance Government (UPA), inflation has even worried Prime Minister Manmohan Singh who called it a “serious threat” to India’s growth momentum on Friday.
Food price index in the country accelerated by 17.05 percent in the week ended Jan 22 compared to 15.57-percent surge in the week before. Fuel price index too rose 11.61 percent against 10.87 percent in the preceding week.
Speaking to journalists at a meeting with members of the Indian Chamber of Commerce (ICC) here on Friday, Ahluwalia said that the inflation situation was indeed “very serious” but the government was aware of it and trying to tackle it as best as it could.
Calling it the surge in food price index a “seasonal spike”, he said, “I expect overall inflation to be brought down to seven percent by the end of March.”
“I certainly think that the surge in prices is quite abnormal but the prices are likely to come down substantially in about six weeks from now,” he added.
He also backed the Reserve Bank of India’s (RBI) decision to hike key interest rates and said that the raises were in part a response to the economy returning to a state before the global economic meltdown.
“Monetary policy is not just a response to the country’s inflation problem. Even without inflation, prudence requires you to go back to pre-crisis state after the recession is over. It is now widely accepted that India is out of the economic slowdown,” Ahluwalia said.
The Planning Commission deputy chairman said that he disagreed with the Opposition parties who were cornering the government over inflation figures. “We must understand that the government cannot control prices very rigidly,” he said.
“While almost every emerging economy is growing, they are experiencing price pressure,” said Ahluwalia, fresh from his trip to the World Economic Forum at Davos.
He opposed banning product exports as a move to deal with price spikes saying that disrupting standard trade channels was not a good idea.
“If there is a shortfall, you should import rather than ban exports. Banning exports only hurts Brand India in foreign counties,” he said, adding that long term import, however, is not a solution.