The Planning Commission of India on Friday said that high inflation, primarily driven by rising food prices, is likely to ease in the next few months on the back of an expected good rabi crop, reports PTI.
"I expect food price inflation to come down in the next couple of months on the back of an (expected) good rabi crop," Planning Commission deputy chairman Montek Singh Ahluwalia, said at a conference.
Downplaying fears of wholesale price index (WPI) inflation touching double-digits, the Planning Commission official said, "I don't think this will happen. I expect WPI inflation to gradually come down."
With economic growth momentum returning, the Planning Commission expects a GDP growth of 8.5% for FY11 and a 9% growth in the subsequent fiscal, he said.
"I think the economy is doing very well. We have weathered an extraordinary crisis. Now we are well set to get back to 8.5% (GDP growth) in 2010-11 and hope to see a 9% growth after that," Mr Ahluwalia said.
"We are going to get back to the path of fiscal prudence," he said, adding that with the economy improving, he expected institutional investments to continue. “I think the fiscal deficit has been brought down—economic growth momentum has returned," Mr Ahluwalia said. "We are counting on this momentum continuing in the next two-years. That is what we predicted and that is what we were expecting."
According to him, the economy has shown very good resilience. The government was concerned about the high food prices which he attributed mainly to the drought conditions of last year.
"I think it (high food prices) is mainly because of the drought conditions last year. Excessive speculation and exaggerated reports have also contributed (to the price rise)," Mr Ahluwalia said. Now, however, with rabi crops coming in, he expected food price inflation to decline in the next couple of months.
On government borrowings and whether it would impact private demand, Mr Ahluwalia said, "There is no need for us to worry about government borrowings next fiscal," he said. Total borrowing is pegged at Rs4.57 lakh crore in the next fiscal.
Asked about the poor response which state-run units’ issues have received recently, Mr Ahluwalia said that the relatively poor response did not indicate that the government should slow down its disinvestment plan.
State governments should proactively take steps to improve basic infrastructure like health and education, Mr Ahluwalia said.