Highlighting substantial structural reforms, Chief Economic Adviser Arvind Subramanian today said that the government was facilitating declining inflation through its agricultural policies and inflation is expected to remain under control as it has adequate stocks to deal with shortage of foodgrain in the eventuality of poor monsoon.
Talking to newsmen here he said, "One factor that is going to affect inflation going forward is the Monsoon. Because we do have adequate stocks, we will be able to contain inflation even if Monsoon does not turn out to be as good."
The Chief Economic Adviser made a presentation on ‘ Indian Economy: An Interim Update’ during the press conference. He concluded that post war history suggest structural reforms take time to influence growth and policy support is crucial over short run, especially consumption, public investment, and private investment.
In concluding part of his presentation, Subramanian highlighted that governance has improved as decisive reduction in corruption reflected in clean and transparent auction of coal and spectrum. Good governance was also reflected in liberalization of gold import regime, reducing the rents intrinsic to quantitative restrictions.
He said that substantial structural reforms were reflected in institutional areas like unleashing cooperative and competitive federalism by adopting Finance Commission recommendation and creating Niti Aayog. The government is very close to securing political agreement to launch game-changing GST. “We are strongly pursuing financial inclusion by creating Jan Dhan accounts and initiated comprehensive social security via pension, life insurance and accident scheme,” Subramanian emphasised.
Admitting the risk to inflation, he said that the government is facilitating declining inflation via agricultural policies and expressed hope that it would contain price rise.
The Indian Meteorological Department (IMD) has projected a below normal monsoon which might impact food production leading price rise. “At present, the price situation is much better with Consumer Price Index (CPI) inflation down to 5 per cent and the Wholesale Price Index (WPI) remaining in the negative territory for past several months, Subramanian said.
"CPI inflation is down at about 5 per cent, the latest reading and WPI inflation are in negative territory…the latest reading was of course (-)2.7 per cent," he said, adding inflation was likely to remain at 5 to 5.5 per cent, as was projected by the Economic Survey.
Subramanian said that the oil prices going forward will remain between USD 50-80 and there would not be much "wild swings".
Overall inflation is down, inflation prospects are looking good. Substantial quantity and quality of fiscal consolidation and the external situation also are under reasonable control," the |Chief Economic Adviser said.