Planning Commission Deputy Chairman Montek Singh Ahluwalia on Monday said food inflation will come down next month from a more than a decade’s high of around 20 per cent, as apprehensions about adverse effect of drought were easing.
“I think this fear of negative impact of drought being reduced, there will be a softening in food price inflation in the next month,” he said.
He further said that inflation at the moment was not caused by excess money supply but was dominantly on account of surge in food prices.
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While refusing to speculate on what needs to be done to curb inflation, he said, “When inflation begins to go up, one of the instruments that people use is monetary instrument.”
RBI is scheduled to review its monetary policy stance later this month and has dropped hints of tightening money supply. Mr. Ahluwalia, however, said that it is a complex issue as the policy makers have to deal with only one set of price rise (food).
Following widespread drought and floods in various parts of the country, food inflation climbed to more than a 10-year high of 19.95 per cent in December, driven mainly by higher prices of potato, other vegetables and pulses.
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According to latest figures, food inflation stood at 19.83 per cent during the third week of December.
To meet ministries on Plan outlay
Planning Commission Deputy Chairman Montek Singh Ahluwalia on Monday said it will start interacting with Union ministries over the next two to three weeks over their demands for gross budgetary support for the next fiscal, amid reports that ministries have asked for a steep hike in resources in the Plan outlay.
“We have yet to get from handful of ministries their actual demands. But, the Planning Commission will now discuss with the ministries over the next two to three weeks, what their demands are, which ones of them are justified and to what extent they can be fitted within the resources available,” he said.
Ahluwalia’s statement assumes importance since there are reports that Union ministries have asked for a massive 82 per cent increase in the gross budgetary support (GBS) during 2010-11 over the budget estimates for the current fiscal.
“So, sometime between now and may be early February, we will have a number (for GBS). In the meantime, I am afraid, you just have to speculate...We have not even started the process,” he said.
Various ministries have reportedly asked for Rs 4.09 lakh crore of the GBS next fiscal against Rs 2.24 lakh crore in 2009-10.
Mr. Ahluwalia said the ministries always ask for much more than available. “This is a normal process...I mean the essence of the Planning function is that we will be discussing with the Finance Ministry on what is available, but then we will be trying to match the demands to the available resources,” he said.