Chief Economic Advisor in the Ministry of Finance Kaushik Basu today said inflation was likely to fall below 8 per cent in April, against 8.98 per cent in March. He also exuded confidence that the economy would grow at the projected rate of about 9 per cent in the current financial year.
“Inflation has come down from where it was last year and I am expecting that April inflation will be about a percentage point lower than where it was in March… I will expect it to be less than 8 per cent. That’s not good enough, but you have to keep in mind that global crude prices are very high,” Basu told reporters on the sidelines of a function by industry chamber Assocham.
The government had constituted an inter-ministerial group (IMG) in February to suggest measures to arrest the rise in prices, particularly of food items. The group will meet next month after the Reserve Bank of India’s (RBI) annual monetary policy review on May 3.
“We will have an important IMG meeting in early May. We want to look at macro-economic demand management,” Basu said, and added RBI Governor D Subbarao might also attend the meeting.
He said inflation was driven by a surge in global commodity prices and easy flow of funds from the advanced economies and that the government would have to come out with new measures to control this “new kind of inflation”.
Inflation in March at 8.98 per cent was higher than the expectations of the government as well as RBI. Reserve Bank has increased its key policy rates eight times since March last year to check rising prices. Economists and bankers are expecting another round of raise from the central bank on May 3. Basu also said the Indian economy was expected to grow between 8.75 per cent and 9.25 per cent in financial year 2011-12 even though concerns were raised about the industrial production number in the past few months. “I expect India’s GDP to grow at 9 per cent in 2011-12 unless there is a major shock in the global economy,” he said.
On credit ratings agency Standard & Poor’s (S&P) decision to downgrade US sovereign debt outlook from stable to negative, he said it was a matter of concern not just for the US but for other economies as well. He, however, expressed hope the powerful economies would be set back to correction.
