Inflation to decline from Dec: Kaushik Basu

Inflation will start declining from December and the Reserve Bank expects it to come down to 7% by the end of the financial year in March, Chief Economic Adviser to finance Ministry Kaushik Basu said here today.

Headline inflation hovered near the double-digit mark, at 9.73%, in October. It was 9.72% in September.

Addressing a symposium on 'Global Uncertainty and its Impact on India's Exports', he said India is not a high inflationary economy compared to countries like Germany and Hungary. "Both these countries have huge inflation and we are nowhere near it," he said .

"My expectation is December inflation, data for which we will get in January, will be lower. The Reserve Bank of India and Finance Ministry expect inflation to be 7% in March," he said.

Holding that inflationary trends of 9-10% have been difficult and hard on people, Basu said it had remained close to 10% for four months last year but has fortunately gone down.

However, India has witnessed longer periods of double digit inflation, even at around 20% for over 20 months in the 70s and 90s, Basu noted.

He said food inflation may also show a decline by mid December.

Among factors contributing to inflation are international scenario, including crude prices. "Whenever crude prices go up, inflationary pressures go up. If global pricing is more and you hold it low for Indian consumers you will have to generate money in form of subsidy. That injected money will cause other prices to rise."

"If you allow petrol/diesel prices to rise, that will also have some effect," he said.

No matter what steps are taken, barring a few differences here and there, inflationary pressures would stay when global commodities prices surge, Basu said.