Even as retail inflation in the country peaked to 7.35 per cent at a five-and-a-half year high in December last year with economic growth lagging below five per cent, the Centre feels it is momentary and will ease in the coming months.
The Centre is of the view that several initiatives taken by the government in the past few months and its preparation to combat inflation and the growth slowdown in the forthcoming Budget will help normalise the situation to a large extent.
At an event jointly organised by various industry bodies, Minister of State (MOS) for Finance and Corporate Affairs Anurag Singh Thakur said, “The ongoing inflation is momentary and will improve as the season changes. The government has already taken various measures to combat the economic situation and is consulting the industry to come up with more measures”.
According to CARE Ratings, the cumulative inflation (April – December) in the current fiscal year stood at 4.1 per cent which is marginally higher than RBI’s median inflation target of 4 per cent and higher than 3.75 per cent recorded in the corresponding period a year ago.
Both rural and urban inflation have been above 7 per cent, driven by double digit growth in food prices in both regions. The rise in vegetable inflation to a 6-year high, along with inflation in pulses segment reaching a 3-year high have been the chief reasons driving inflation.
In addition, a significant spike in the transport and communication segment has also weighed on inflationary pressures.
After 5 consecutive months of deflation in the fuel component, inflation in this segment rose to a 6-month high of 0.7 per cent in December as well primarily driven by higher crude oil prices.
The agency is of the view that inflation is likely to moderate marginally in the coming months, but would continue to remain at elevated levels.
“Statistically CPI inflation will be handicapped by low base effect in January which will increase in the next two months. On the other hand, moderation in prices of onions and other vegetables which has already been witnessed in January could support the moderation in overall inflation”, it said.
Thakur is taking inputs from the industry and listening to their demands in the run-up to the 2020 Union Budget.
“The Centre is listening to the demands from the industry and we have already reduced the corporate tax rate. Some of the suggestions of the industry will be accommodated," he said.
According to the minister, the reduction in corporate taxes, aimed at furthering industrialisation, will also help bring in foreign investment besides Indian ones.
Amidst allegations of flight of industrialists and investors from India, Thakur said that honest taxpayers in the country need not be afraid but the government will fall hard on the dishonest ones.
“Imandaro se bair nahi, beimano ki khair nahi (No dispute with the honest ones and no respite for the corrupted ones)”, he said.
The minister added that although India’s ranking in ease of doing business has improved, its ranking in arbitration and judicial matters is still low and needs to be improved. The Centre has planned to open more NCLATs in other locations as well as increase judges in the appellate tribunal.