The spiralling food inflation, which has become the biggest concern of people in the country, would start declining in two months after the winter crops come into the market, C Rangarajan, who heads the Prime Minister's Economic Advisory Council, said in Kolkata on Friday.
"The food inflation rate would be around 8.5 per cent at March-end (end of current fiscal 2009-10). In another two month's time, food prices will start declining," he said, addressing a conference organised by the Calcutta Chamber of Commerce.
"The food inflation is expected to be around 6 per cent in the second half of 2010-11," Rangarajan said.
Asked whether forward trading is one of the causes behind the food inflation, he said there was "no clear cut evidence" that futures trading was leading to food price rise.
"Though food inflation is by and large a supply-side problem, we need to contain aggregate demand though policy action," he added.
He said that a high level of stock with the public distribution system (PDS) was also one of the reasons behind food inflation. At present, there are 25.65 million tonnes of rice and 16.28 million tonnes of wheat in the stock.
"We must release more food grain through PDS. We do not have adequate channels...We need to have additional channels to supplement PDS," he said.
Asked how the government would spread out its borrowing programme in 2010-11, Rangarajan said he expected front loading would happen.
"With demand for credit usually higher in the second half, I think a major portion of the borrowing would happen in the first half of the year," he said.
The government has a gross borrowing target of Rs.4.57 trillion in 2010-11 as against Rs.4.51 trillion in the current fiscal.