Economic Survey 2013: Easy money policy by rich nations could fuel inflation

Feb 27 2013, 14:30 IST
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Economic Survey: Inflation seen declining to 6.2-6.6% by March-govt. (Reuters) Economic Survey: Inflation seen declining to 6.2-6.6% by March-govt. (Reuters)
SummaryFinance ministry delivered a report on the state of the economy on Wednesday.

Easy money policy of major developed and developing nations could aggravate inflationary expectations in India, cautioned Economic Survey for 2013.

"The positive effect of continuous policy easing by the major advanced and developing countries could pose a higher risk to inflation expectations and may be considered as an upside risk to inflation forecast," said the Survey tabled

in Parliament today by Finance Minister P Chidambaram.

"Inflation has eased in almost all major advanced and emerging market economies in the current year," it said.

As far as India is concerned, it said, the average wholesale prices-based inflation in 2012 (April-December) moderated to 7.55 per cent from 9.35 per cent in the corresponding period of the previous year.

Inflation further eased to three-year low of 6.62 per cent in January as compared to 7.23 per cent in the same month last year.

With moderation in non-food manufacturing sector and global commodity prices, the headline inflation may decline to 6.2-6.6 per cent in March 2013.

Prescribing ways to control the price rise, the Survey said: "Apart from monetary policy attempting to control demand, supply side responses will be necessary to bring down inflation in a sustained way, and ongoing policy initiatives need to be pursued."

Given that India faces a number of constraints on the supply side, in the short run, curbing demand for commodities moderately to catch up with supply may be an effective tool, the Survey said.

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