Inflation is likely to decline to around 5 per cent in the next few months provided crude prices do not rise further, Chief Economic Adviser to the Union Finance Ministry Kaushik Basu said here on Friday.
“I cannot forecast crude prices but we are not expecting a sustained increase in international crude prices, but if this happens then growth can be hurt,'' he cautioned saying that India was expected to grow at 9 per cent this year.
Speaking at the Bengal Chamber of Commerce and Industry, he said inflation and corruption were the two clouds looming over the country. He felt that inflation had been managed well, but it was still not at a comfortable level and there was need to continue with calibrated moves to check it. While inflation had hovered at around 8 per cent in March, “bigger drop is expected, may be just below 7 per cent,'' in April he said adding, that “there was no magic formula for bringing down inflation.''
He said that while high inflation was not good for growth, the government could not be pushed to take certain actions as it might cause unemployment.
On corruption and governance, Dr. Basu said that determination could help tackle such matters and a small change in the bribery laws could also cut down corruption.
Referring to the economy, Dr. Basu said that although it was growing well, there was need to direct the policies at the bottom 20 per cent. “The management of money being targeted at the poor, needs to be tackled better We need to repair the leaky bucket being used to deliver subsidies to the poor.''
On diesel decontrol, he said that while this had to be done before long, there was also a need to time it. He felt that it might trigger an inflationary spiral in the short run, but it would be beneficial in the long term.
