CHENNAI: Common man will have to live with high prices for another two-three months as inflation is expected to come down only by September, Chief Economic Adviser, Dr Kaushik Basu said on Tuesday.
As per expectations and calculations of the Finance Ministry, inflation will go below 7 per cent from September, Dr Basu said at a seminar here.
"So, you have to live with this high inflation for another two-three months and it should begin to go down from September," he said.
"From the middle of October, for the first time, you should see softening of inflation going down below seven per cent," he told the seminar on ‘Indian Economy and The Economic Survey’, organised by the Southern India Chamber of Commerce and Industry.
Dr Basu, however, said that the government is taking stock of the situation and looking at "fire-fighting" measures.
Inflation was at 7.55 per cent in May on the back of rising prices of vegetables and petrol.
Amid heightened inflation worries, RBI last month kept key policy rates unchanged to control the price rise, disappointing the industry and retail borrowers who were expecting at least 0.25 per cent rate cut.
The industry is pitching for cut in lending rates, saying high interest rate regime has slowed down the growth. Dr Basu, however, noted that India’s inflation record was "much much better" against other emerging economies.
Referring to the rupee depreciation, Dr Basu said it was very similar to what was happening with other currencies of emerging economies.
"With the concern for Euro, it’s going to be dramatic experiment. You look for safe havens (to invest) like the US treasuries, German bonds and Gold. You find money is going to all three of these. But, if you look at the returns, the returns are close to zero."
In this scenario, he said, with the couple of "policy mistakes that we have made, I am not denying that there is growth slowdown in India. 6.5 per cent last year’s growth is comparatively a slow growth over what we did in the past."
He, however, asked industrialists to make use of the opportunity, saying that China’s rising wages coupled with weakening rupee provided an ideal space for export thrust.
"...But (that) needs some intelligent policy measures and I believe that India should go for it. India’s future is immense in this, if we bring our acts together", he said.
He also pitched for allowing foreign direct investments in retail sector, saying it would be "highly beneficiary" for the farmers and be a major thrust to Indian exports. He, however, noted the issue met with huge amount of criticism.
Dr Basu also said that corruption was something that India should be "ashamed of". "India needs governance reforms and corruption control."