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Can the new Government tame the rising inflation?

Wednesday, 18 June 2014 - 11:28am IST | Place: Pune | Agency: dna

The new government has to tame the rising inflation, which has now touched a five-month high standing at 6.01 per cent. dna asks readers what steps should the government take as top priority to bring down inflation?

Hoarding also responsible for rising inflation...

Centre is committed to ease supply side bottlenecks and has also asked states to take firm measures against hoarders to check speculation. The Government is serious of the matter and is committed to ease supply side constraints.

Arun Jaitley, Union Finance Minister


Take Drastic measures...
The higher WPI for May at 6.01% and upward revision in inflation for March also posting 6.0% shows that the moderation in Wholesale Price Index (WPI) was short-lived. Tough measures are needed, but there are no short-term solutions. This is why the PM has already asked people to steel themselves for what lies ahead. The budget has to ensure that the deficit is under control, expenditures have to be curtailed on items that raise demand-side factors, while increased on items that raise supply-side factors. So subsidies that raise purchasing power in the hands of consumers will add to the pressure, while expenditure on infrastructure on roads, power, warehousing etc. will ease pressure. Inflation is a key impediment to growth, and the government has to go in for drastic action on the fiscal.

Sumita Kale, Chief Economist, Indicus Analytics


Produce like China...
Lower the interest cost and the eventual cost of the commodity reduces. Our country should stop importing in large numbers. Manufacture more goods within the country itself and then we can keep a check on foreign imports. Government should introduce more subsidies on goods that they can but they aren’t doing it. Factors like strict rules and production issues hamper our chances of keeping inflation under control. Produce the goods we import from China in our own country.

Bharat Shah, Chartered accountant


Introduce FDI in retail...
We need contingency plans to deal with the impact low monsoon is going to have on food grain and vegetable prices. Finance minister has blamed it on the hoarding. You cannot say that hoarding is the main issue .In long term, better supply of food grains and equal distribution should be a priority. I think FDI in retail should be introduced to help our market get bigger

Rishabh Parakh, CA, Director Money Plant consultant


India needs more oil refineries...

The rising tensions in Iraq, which is India’s second largest oil supplier, has accelerated fuel and oil prices resulting in fuel inflation rise- a 28-month high. This has had an impact on the rupee weakening against the dollar. The Government should take serious steps in water conservation and building agricultural infrastructure so that the farmer community does not get affected. India needs to construct oil refineries where one can store larger stocks of oil hence reducing its dependency on international fluctuations. The RBI will have to work in sync with the government if one has to achieve a strong stable rupee.

Zubin Kabraji, Regional Director, Indo-German Chamber of Commerce


RBI needs to curb inflation
The RBI has stated that Consumer Price Index (CPI) is more important and efforts will be made to bring it under control. The CPI figure had come down slightly for May 2014. One of the main components is food articles, which has gone up by 9.5%. The Government will need to plan ahead to address supply-bottlenecks and logistics issues to make sure that food inflation does not spike. Timely release of staples from FCI, reforms in Agriculture Produce Market Committees and co-ordination of imports and exports of agricultural commodities will be necessary. The inflation will also moderate due to high base effect of last year. If there is no escalation of Iraq tension, I expect crude oil prices to remain benign. This will help to meet RBI expectations of sustainable lower inflation in the second half of the year. In this scenario, one cannot expect interest rate cuts from RBI in the near term.

Bharat Phatak, Investment Advisor

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