Kaushik Basu panel sees it as inflation-buster

The inter-ministerial group on inflation that the UPA government had formed in February this year has come up with its first position paper.

Announcing the conclusions, Kaushik Basu, the Cornell don who is now the chief economic advisor in the finance ministry, announced on Friday that allowing in foreign direct investment (FDI) in multi-brand retail would be one of the ways of containing food inflation, along with the reform of agricultural produce market committees (APMCs).

The recommendations have been sent to the prime minister and the finance minister, said Basu. According to him, APMC reform would allow free movement of grains across the country and FDI in retail would speed up large-scale and efficient movement of food grains from the farmers to consumers, and these two measures would considerably reduce food inflation.
Basu expressed surprise over food price inflation, which stood at 8.66% in April.

“We were taken unawares,” he said, attributing it partly to the global economic volatility, especially in oil prices. He felt that there are things the government can do at home, and that pertained to APMC reform and opening up retail to FDI.