Chief Eco Advisor forecasts below 7 pc inflation in Apr

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SME Times News Bureau | 08 Apr, 2011
Chief Economic Advisor Kaushik Basu has forecast a below seven percent overall inflation for India in April and said the figure will go down to five percent over the next couple of months if food prices do not rise sharply.

"In the month of February, inflation was 8.3 percent. I think it was hovering around 8 percent in March," Basu said at a programme at the Bengal Chamber of Commerce and Industry here Thursday evening.

"My expectation is (that) in April the inflation will be just below seven percent. My forecast is based on the current price situation. But in the long-run I expect the inflation to go down to five percent over the next couple of months," he said.

"I am assuming (that) food price does not go for another big hike. If food price goes for a big hike and remains there, we will face further inflationary pressure. You can do nothing about this...and not only that, it will hurt our growth prospects also," he said.

Stating that the Reserve Bank of India's (RBI) monetary policy took six to nine months to be effective to check inflation and the finance ministry's fiscal policy required three to six months to do the same, Basu said the government was doing a "very very good job" of controlling inflation.

He, however, said a heavy cutdown of money supply in the market would lead to high unemployment.

"If you cut down the amount of money supply, the trouble is inflation will come down but factories will be closed, leading to increase in unemployment," he said.

The noted economist felt that in a globalised world economy, coordination of central banks of different countries was necessary to control inflation in one country.

"Effectively now we have single economy, but there are several money creating authorities. When Bank of Japan is taking any measure, it does have an impact on the Indian economy. So, in the G20 meeting, I said that coordination of central banks' is the key," he added.