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Economic Survey pegs inflation at 6.5-7 per cent

The Economic Survey for 2011-12 pegs inflation at 6.5-7 per cent by end of March and projected a further moderation in the next fiscal.

IANS | March 15, 2012 | Updated 14:40 IST

The Economic Survey for 2011-12 tabled by Finance Minister Pranab Mukherjee in Parliament on Thursday pegged inflation at 6.5-7 per cent by end of March and projected a further moderation in the next fiscal.

"A favourable base effect in prices and continued global slowdown are expected to moderate inflation to around 6.5 to 7 per cent by March and further moderate in the months ahead, barring unexpected shocks, such as oil prices in international markets," the survey said.

It may further moderate during 2012-13 due to tightening of monetary policy and other measures put in place by the government," it added.

Inflation in the current fiscal has largely been driven by high food prices. It had slipped to a low of 6.6 per cent in January, but rebounded to almost 7 per cent in February.

The survey, however, said that fiscal consolidation was the only way to keep inflation down.

"Rapid fiscal consolidation is the only way out to keep inflation down and aim for robust growth. The principle way in which this has to be achieved is by raising our tax-GDP ratio and cutting down wasteful expenditures," said the document.

The survey said that monetary measures by the Reserve Bank of India (RBI) and its impact on curbing inflation needed to be studied further to improve efficiency of such actions in the future.

Incidentally, the RBI in its mid-quarter review of the monetary policy on Thursday left key rates unchanged, citing upside risks to inflation.

Also the government needed to ensure that supply side problems in food items were addressed to improve productivity. The survey recommended reforms in the way mandis conducted their business - something which would be beneficial to organised retailers.

"Improved mandi governance is an area of concern. A greater number of traders must be allowed as agents in mandis. Anyone who gets better prices and terms outside the Agricultural Produce Marketing Committee (APMC) or its farmgate should be allowed to do so," the survey said.

Another key recommendation is taking out perishable items from the ambit of the APMC act as the government regulatory mandis sometimes prevent retailers from integrating their enterprises with those of farmers.

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