Non-food inflation may rise: UP Inc

Uttar Pradesh Inc today expressed concern that the non-food inflation may rise due to increase in prices of steel, cement, fuel and imposing of service tax on real estate.

Participating in a discussion on Union Budget 2010 organised by PHD Chamber of Commerce and Industry (PHDCCI) here, industry representatives said the Budget had not recommended any specific measures to contain the high wholesale price index (WPI), which was hovering over 17 per cent.

“Although food inflation is likely to come down due to excepted bumper crop, the high WPI is a cause of concern,” Giri Institute of Development Studies director A K Singh said.

Mentioning that the Centre first allowed sugar export and later imported it at a higher price to combat domestic shortage, he said the government response on the price front had been weak. Similar situation could arise in case of wheat if its export was allowed, he warned.

“Strict fiscal policies are needed so that inflation could be contained below 7.5 per cent,” Singh added.

Noted economist Arvind Mohan observed the Budget missed on carrying out the second generation reforms, and rural and human development should have been given more importance.

“In the farm sector, opportunity for reforms has been missed out for developing Public Private Partnership (PPP) and logistics of movement of farm products to the domestic and global markets. Similarly, development of cold chain and food processing should have been addressed,” he suggested.

Mohan said inflation was likely to rise due to the cascading effect of increase in prices of fuel and several other commodities and increase in the service tax across the board.

However, the participants conceded there had been good focus in the Budget towards the PPP in defence and import of farm machinery, while the uncertainty about the Goods and Service Tax (GST) and Direct Tax Code had been cleared.

While, substantial relief had been given to the middle and upper class in the new personal tax slabs, no relief had percolated to the lower income groups, the participants observed.