Chief Economic Advisor Kaushik Basu on Monday favoured decontrolling of fuel prices, which might raise inflation in the short-term, but would actually bring down the rate of price rise in about six months.
“My belief is that fuel prices ought to be decontrolled. I feel that a certain amount of decontrol ought to be done for petroleum products. 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,'' he told reporters here.
Mr. Basu said that while food inflation had come down, manufactured items like iron and steel were witnessing price inflation. He explained that food inflation might look high in May, as inflation was calculated on a yearly basis, but the food price index was only slightly higher than what it was in November, 2009. However, the Chief Economic Advisor refused to speculate on the steps the Reserve Bank of India would take in terms of monetary policy that it would unveil on July 27. He projected that the economy would grow by 8.9 per cent in the first quarter of this fiscal.
