'Food prices will come down by March'

A 4 % rise in agriculture key for sustaining growth

Economic Advisory Council to Prime Minister Chairman C. Rangarajan on Friday expressed confidence that food prices would start declining by March next as inflation by then was expected to come down to 6 per cent from the current double digit.

Talking to reporters after delivering a talk on ‘The current economic scene and policy options' at the College of Defence Management here, he said agriculture production was expected to grow at 4 per cent as the monsoon was good. The impact of floods would be marginal on agricultural production.

Earlier in his talk, Dr. Rangarajan said food prices were a matter of concern and needed to be addressed. At present there were stocks of 22 million tonnes of rice and 32 million tonnes of wheat, which could be released through the public distribution system to moderate the prices. A 4 per cent growth in agriculture must be achieved to sustain economic growth as even a small decline in agricultural growth could cause distortions in the economy.

Pointing out that infrastructure was of critical importance, he said the power segment needed to grow at a rate higher than the overall economic growth. He said another 50,000 MW had to be added within two years to meet the power generation target fixed for the current Plan period.

Stating that Indian economy performed commendably although affected by the global economic crisis, Dr. Rangarajan said the ‘decoupling theory' that economies of the developing countries were no longer dependent on the developed economies was true to some extent.

On the prospect of recovery of economy globally, he said it was expected to be slow. “The slow growth rate would mean some dampening on the growth rate of Indian economy,” he added. Ruling out double dip recession as symbolised by alphabet W, he said “what we are seeing is a U-shape recovery. It is taking longer than expected.''

Replying to questions from senior officers from the defence services, he said it was imperative that Indian economy grew at 8-9 per cent in the next two decades to reduce poverty and ensure reasonable standards of living for the people.

He also expressed confidence that the fiscal deficit would be contained at the budgeted level by the Union Government.