Food prices stabilising, says Basu; manufacturing bites

Even as inflation entered double-digits, Kaushik Basu, the Prime Minister’s chief economic adviser, said on Monday that it was primarily due to the base effect and a price hike in manufactured items.

Even as inflation entered double-digits, Kaushik Basu, the Prime Minister’s chief economic adviser, said on Monday that it was primarily due to the base effect and a price hike in manufactured items.

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Food inflation has shown signs of stabilising, he said, adding that the growth in the current quarter could be 8.9 per cent.

Basu said food inflation could rise further in the next two weeks, but there was no need for any major policy action on this front.

Basu said decontrolling fuel prices could lead to a spurt in the inflation rate in the short term, but prices would ease in six months.

“Inflation may in fact come down due to the lower fiscal deficit,” Basu said, adding that prices of essentials must be protected. He felt fuel prices should be decontrolled, sooner or later, as under-recoveries of oil companies are putting pressure on the country’s fiscal balance.

He said the annual inflation for the current fiscal is likely to be less than 5 per cent, “though the RBI projection is a little higher”.