Prices will come down in normal course: Montek

In view of declining inflation and recessionary conditions, the Planning Commission expects industry to cut prices in the normal course to battle economic slowdown.

"Let me assure you that inflation is coming down and in recessionary circumstances, industry will automatically soften prices," Planning Commission Deputy Chairman Montek Singh Ahluwalia told reporters here.

Inflation, measured by movement in wholesale prices, after a gap of five months came to a single digit of 8.98 per cent for the week ending November 1.

Pointing out that prices rise significantly when demand is very strong, he said, "I don't expect prices to be a problem in the next six months."

Finance Minister P Chidambaram yesterday asked automobile manufacturers, realty firms and airlines to cut prices to deal with the slowdown.

"Hotels must cut tariffs; airlines, car makers and two-wheeler makers must cut prices; and real estate must cut rates of apartments and homes they sell," he had said.

However, the FM's request did not evoke a very positive response from companies with Rahul Bajaj, Chairman Bajaj Auto, saying that "this (two-wheeler) industry has a margin of about 4-5 per cent only and in the near future we do not see any price cuts".

Realtors were also not far behind in saying no to price cuts. Realty leader DLF's complained, "There are no takers for housing... Ideally, the interest rate should be around 7 per cent."