No monetary tightening expected: Basu

Two key functionaries in the government expect no monetary tightening measures soon, despite the rising food inflation. Instead, they see food prices cooling by the next month.

Kaushik Basu, chief economic advisor in the Ministry of Finance, today said there was no need to take steps which could have implications for growth and employment. “Right now, there are no expectations of monetary tightening, nor do I believe there is a reason for it,” Basu said at a Ficci event. He added that food inflation would peter out in few months.

Planning Commission Deputy Chairman Montek Singh Ahluwalia, too, said food prices were expected to moderate by the next month, as the current price rise was not due to excess liquidity in the economy. Food inflation reached an 11-year high of 19.95 per cent in the second week of December.

Commenting on the country’s gross domestic product, Basu further said, “India might grow slightly above 7.5 per cent in the current year (fiscal), and achieve 9 per cent growth in 2010-11…If India’s growth crosses that of China in 4-4 years, it should not be a surprise.”