The high interest rate regime is likely to continue in near term as long as non-food item inflation eases to 6.5%, Principal Advisor in the Planning Commission, Pronab Sen, said today.
"Though food inflation is in negative zone, but manufacturing item inflation is at 7.8%. I do not think they [RBI] will reduce rate unless this inflation comes down to at least 6.5%," Sen said at an interactive session with the Bharat Chamber of Commerce here.
Asked how long it would take the non-food inflation to ease to 6.5%, Sen said "between three to four months".
According to him, food inflation which is in deflation of over 3% will not continue for long and by March-April it would be to 7-8%.
"We are in negative zone on food due to very high inflation in food articles last year," Sen said.
Regretting that the government was not addressing structural issues affecting inflation in agriculture, Sen said inflation was within permissible limit despite food inflation of 7-8% last few years due to low inflation in manufacturing articles. But drought shot up food inflation.
Calling for proper logistics for agricultural growth, he said, "it is chicken and egg problem. Production side problem cannot be solved unless there is proper logistics mechanism."
Asked whether the Planning Commission has addressed the issue, Sen said, "we have flagged the issue in the 12th plan concept paper."
Sen advocates change of APMC Act by states for revamp in agriculture.
On land acquisition, the Planning Commission principal advisor recommends for a sensible method for pricing of land.
"Land is genuinely a scarce commodity, specially in West Bengal which has the highest population density. But we can link to some indicator like employment for per unit of land allowed for acquisition," Sen said.
