Inflation to fall to 6-7%: Basu

Chief economic advisor Kaushik Basu on Thursday said that inflation may come down to 6 to 7 per cent in the next three months and that there was no need for any capital controls to check inflows as have been at a comfortable level.

"My expectation is inflation will be on a downward path, but fluctuating over the next three months, before a sharper downward decline. I expect it to be 6 to 7 per cent within the next three months," Basu said after releasing a UN report.

The wholesale price-based inflation for March was 9.9 per cent, higher than the Reserve Bank's projection of 8.5 per cent. The spike in inflation was led by food inflation that remained over 16 per cent in April after crossing 20 per cent in December.

Further, on the rise in capital inflows, Basu said the inflows are at a comfortable level and do not call for any controls to check a possible overheating of the economy. "Actually there is not a surge in capital inflows. It's flowing very comfortably.

We have seen bigger inflows earlier into India. So, I don't think it is really a situation where you need to take any capital control (measures)," he said. He said the country already has a couple of capital controls that have served the economy well. "I don't think it's really a kind of occasion where you need more on that ... right now the situation is not worrying because it's coming in very comfortably," he added.

But, overall inflation may still see a gradual decline due to food inflation cooling down. "Rising prices of manufactured goods would be offset by the falling food prices. I think the WPI inflation is moderating at a slow pace and the April numbers will be marginally lower," Joshi said.

The Reserve Bank of India (RBI) in its annual monetary policy on April 20, raised the key inter-bank lending and borrowing rates and cash reserve ratio by 25 basis points each to tame inflation.

RBI has projected inflation to come down to 5.5 per cent by end of this fiscal from 9.9 per cent in March, but also warned that volatile global commodity prices along with uncertain monsoon and demand pressures may jack it up.