The Planning Commission said on Monday food inflation will come down next month from a more than a decade's high of around 20 per cent, as apprehensions about adverse effect of drought were easing.
"I think this fear of negative impact of drought being reduced, there will be a softening in food price inflation in the next month," Planning Commission deputy chairman Montek Singh Ahluwalia told reporters on the sidelines of a Federation of Indian Chambers of Commerce and Industry function in New Delhi.
He further said that inflation at the moment was not caused by excess money supply but was dominantly on account of surge in food prices.
While refusing to speculate on what needs to be done to curb inflation, he said, "When inflation begins to go up, one of the instruments that people use is monetary instrument." Reserve Bank of India is scheduled to review its monetary policy stance later this month and has dropped hints of tightening money supply.
Ahluwalia, however, said that it is a complex issue as the policy makers have to deal with only one set of price rise (food).
Following widespread drought and floods in various parts of the country, food inflation climbed to more than a 10-year high of 19.95 per cent in December, driven mainly by higher prices of potato, other vegetables and pulses.
According to latest figures, food inflation stood at 19.83 per cent during the third week of December.
Montek also said in case of India, lots of measures to curb inflation have to be directed towards reining in expectations, managing the supply side and better utilisation of existing food stocks.
Finance minister Pranab Mukherjee had also said in Kolkata last week that there was no sign in the economy that excess liquidity is causing the current inflationary pressures.
"I had a detailed discussion with the RBI and found that there is no reason to believe that excess liquidity is contributing to inflation in the economy," Mukherjee had said.
However, he had acknowledged that average food prices rose by 19-23 per cent even in the wholesale price index, which is really high.
"Unlike instant coffee, there is no instant solution to such vexed problems as inflation," the finance minister had said when asked about government steps to curb the rising food prices.
Image: Montek Singh Ahluwalia
