Immediate steps to curb inflation could push interest rates: Basu

Immediate steps to curb inflation could push interest rates: Basu

New Delhi: Chief economic adviser Kaushik Basu on Thursday feared any knee-jerk measures to reign in high food inflation could lead to a substantial rise in interest rates that would affect the industry as a whole.

Even as food inflation data released on Thursday shows a percentage point dip to 10.39% for the week ended 19 February over the previous week, Basu said the numbers are not yet in the comfort zone.

“The current inflation in food is unacceptably high. We have to work towards bringing this down.

“But we can’t just do that in 2-3 weeks because that would result in interest rates going sky high or leading to closure of factories. It has to be through measures and steps," Basu said while addressing a CII event.

The dip in food inflation was on account of lower prices of onions, potatoes and pulses.

However, prices of fruit, milk and vegetables as a group continued to remain high.

Food inflation stood at 11.49% in the previous reporting week and 21.62% in the corresponding period a year ago.

Basu further stressed on using the provisions of the competition law to prevent cartelization by traders to jack up prices of essential food items.

“There is need to invoke anti-competition law", he said while calling for measures against cartelization to bring down the prices.

The competition watchdog CCI is already probing the role of traders’ cartel in the sudden spike in onion prices in December last year.