The Chief Economic Adviser to the Union Finance Ministry, Kaushik Basu, expects food inflation to drop by one per cent this week. At 11.47 per cent, food inflation is high, he said.
Addressing the members of the Bharat Chamber of Commerce here on Monday, he said the government's management of inflation in a gradual and calibrated manner had been good. “I am expecting food inflation to be one per cent less in the weekly report on Thursday,” he said.
While striking a critical note on the management of foodgrains, he expressed optimism that a downward trend in food price inflation would be evident over the next couple of months.
Pointing out that inflation was not fully understood and it came from a variety of sources, he said that there was no hard and fast rule to estimate inflation. “Sources of inflation could be multiple and the easiest way to control is to suck out money, but this cannot be done as then factories would close and unemployment would rise.”
On growth rates, Dr. Basu said that while the current quarter growth rate might be lower than 8 per cent, it was expected to show a sharp rise in the third quarter with 2010-11 ending with a rate of around 8.5 per cent, “which would be very good.”
Explaining the slowdown projected in this quarter, he said that there were three reasons behind this. First, the comparison would be to the same quarter of the previous year when the economy was taking off after a lull. Second, while agriculture was showing signs of bouncing back, its effect would be felt only in the last two quarters. The third reason behind the slowdown was the performance of the services sector which was doing well by international standards but not by “our own standards”, when a growth rate of 11 per cent was clocked against 8 per cent now.”
Dr. Basu, however, said that the third quarter growth would show a sharp rise and the year would end with a growth of around 8.5 per cent. He also felt that it was possible for India to clock a 10 per cent growth rate within two to three years. “It is not impossible for India to join the ranks of industrialised countries by the late 2030s,” he said.
