Cutting custom duties on capital goods, project imports, metals and chemicals would only result in revenue loss and not in way help in checking inflation, the CPIM said on Tuesday. It has also suggested various measures that can help curb the trend.
The Left party said that the increase in the overall inflation rate is driven by spiraling prices of primary articles, mainly food items. The successive increases in petrol and diesel prices under the UPA regime also had a cascading impact on prices across the economy, it said in politburo statement, adding that the poorer sections are being particularly hit because of the rise in prices of pulses, vegetables and cereals.
The government's plea that by cutting custom duties it can control inflation is a fallacy keeping in mind earlier examples, the party said.
"Little seems to have been learnt from the fact that similar cuts in import duty of wheat and pulses in the recent past have not succeeded in bringing down inflation. Such drastic cuts in the import duty on manufactured items would have adverse impact on domestic producers leading to deflation and unemployment,'' the party said.
It added: "Further, such cuts would adversely affect government revenues especially at a time when the country and the people expect the UPA government to increase social sector expenditures to honour the CMP (common minimum programme) commitments.'' The Party said that it is also not proper to take such measures barely a month before the Budget.
The politburo statement added that the inability of the government to improve the supply situation by augmenting production and cracking down on hoarding is responsible for the continuing increase in prices of food items. Speculative trading in the commodity futures market has further aggravated the situation.