India's Chief Economic Advisor, Dr Kaushik Basu, has called for the deregulation of diesel prices without further delay.
According to him, the deregulation would bring down inflation in the long run.
“I personally believe that diesel prices ought to be freed before long,” Dr Basu told newspersons at the Bengal Chamber of Commerce in Kolkata on Thursday evening.
“As soon as you liberalise diesel prices, you will see a short-term rise in prices across board. However, In the long run, inflation will go down,” he added.
“For the long-run good of the country, we should decontrol diesel prices. But given that in the short run it will create a price rise, we may choose the time when inflation is a bit down,” Dr Basu said.
Earlier, speaking on ‘India at cross roads – managing inflation and sustaining growth', he said that inflation for March is expected to be marginally down from the current (February) level of 8.3 per cent.
The inflation for March is expected to be slightly below or just above 8 per cent. However, “in April the inflation should undergo a bigger drop to 7 per cent.”
According to him, the fiscal measures taken by the Government as well as the monetary policies of Reserve Bank should together have an anti-inflationary impact on the economy beginning May.
“I believe that inflation is on a downward trajectory and will inch towards 5 per cent in the coming months provided the crude oil prices remain stable,” he said.
Later elaborating the point, Dr Basu said that crude oil prices were unlikely to witness fresh volatility in the near future.
Describing India's public debt situation as robust, Dr Basu said: “The Finance Ministry has worked out a plan to bring out the debt-GDP ratio from 74 per cent to 65 per cent in three years,” he said.
Income distribution
While advocating for an immediate improvement in income distribution scenario, Dr Basu indicated that a substantial part of the existing social spending towards the poor may be misdirected.
Citing a recent study, he said that as much as 67 per cent of the subsidised wheat does not reach the targeted population. “The Government should repair the leaky bucket,” he said.