JOIN USAs India’s inflation remains one of the world’s highest, the National Council for Applied Economic Research (NCAER) has suggested that Budget 2013-14 must focus on improving agricultural productivity without which the stickiness in prices cannot be tackled.
It also referred to controlling government’s burgeoning fiscal deficit, which will allow the RBI to lower interest rates further to spur growth.
“India will need to improve its agricultural productivity if it wants to find a permanent solution to its sticky inflation,” the economic think tank said in its latest quarterly review of the economy.
NCAER’s suggestions come when India’s food grain output is expected to fall by an estimated 3.5 per cent this year, as erratic rains have hit rice and coarse cereal crops.
The headline inflation in the third quarter this fiscal moderated from the second quarter, but still remains at more than 7 per cent, one of the highest levels among major emerging nations, leaving less room for the RBI to cut interest rates. In December, the headline inflation decelerated to a three-year low of 7.18 per cent while consumer prices rose 10.56 per cent, fastest among BRIC nations that comprise Brazil, Russia and China.
The consumer price inflation from various indices also show stickiness even as rural inflation shows an increasing trend and is higher than urban inflation.
It said that inflation in fuel category may remain high in the coming months due to hike in petroleum prices. “To ease inflation, the government should release stocks in the open market. But medium to long-term solution lies in increasing supplies by raising domestic production and reducing wastage,” it said.