Chief Economic Advisor Kaushik Basu said inflation would cool down by April due to good agricultural production.
“With better food production inflation will die down.
Food inflation is high, it’s a concern. My own expectation is by April-May, the base effect would have gone,” Basu said.
The government needs to take action and has taken action and that is why we are witnessing some decline in food prices, Basu said, adding the overall average inflation will be around 4 per cent for 2009-10.
Earlier he had said though fuel prices would lead to a marginal rise in WPI inflation, however, a lower fiscal deficit in the long-run would dampen the average inflation.
Owing to changes in the tax structure announced in the Budget 2011, fuel prices have gone up and as a result, the WPI will rise by 0.4 per cent, he said.
In the Budget, the government hiked customs duty on petrol and diesel to 7.5 per cent from 2.5 per cent while excise duty was raised by Re 1 on non-branded (normal) petrol and diesel.
Meanwhile, Minister of State for Finance Namo Narain Meena in a reply to the Rajya Sabha said the hike in prices of items could be attributed to expectations of supply-side constraints of food items, especially due to unfavourable Southwest monsoon.
The government has taken several measures to check inflation in food items, including reducing import duties to zero for rice, wheat, pulses, edible oils and sugar, Meena said.
Besides, the government allowed import of raw sugar at zero duty under open general licence, he said.
Two million tonne of wheat and one million tonne of rice have been allocated to states for distribution to retail consumers over and above normal public distribution system allocation, he added.