Chief Economic Advisor Kaushik Basu on Monday said he favours some decontrolling of fuel prices, which may raise inflation in the short-term, but will actually bring down the rate of price rise in around six months.
“My belief is that fuel prices ought to be decontrolled. I feel that a certain amount of decontrol ought to be done. If you do that, inflation may increase in the short-term, but six months down the line, inflation may in fact come down due to the lower fiscal deficit,” Mr. Basu told reporters here.
He said that while food inflation has tethered out, manufactured items like iron and steel are witnessing price inflation.
He explained that food inflation may look high in May, as inflation is calculated on a yearly basis, but the food price index is only slightly higher than what it was in November, 2009.
Mr. Basu refused to hazard a guess on what the Reserve Bank will do in terms of its monetary policy, to be unveiled on July 27.
He projected that the economy would grow by 8.9 per cent in the first quarter of this fiscal.