'Market forces will correct inflation surge in time'

New Delhi, Feb 9: As the inflation rate further crossed theprevious high of 6.12 per cent to stand at 6.58 per cent, FICCI said itwas an inevitable offshoot of high growth and that the market forces indue course would correct the upward bias in prices.

However, the speed and effectiveness of such a process wouldcritically hinge on the agriculture sector's ability to scale up tomeet the huge demand for primary goods and the removal of supply siderigidities impeding the growth and competitiveness of the Indianindustry.

FICCI strongly suggested that the government immediately commititself to a twin long-term strategy, which combats the bottlenecks inthe supply of primary articles and manufactured products.

The chamber opined that the government should draw up a long termaction plan that tackles low farm productivity, volatility inproduction, poor supply chain infrastructure and inefficiencies inmarketing infrastructure for farm products.

The government may also consider improving the availability of food grains by beefing up of the targeted PDS system.

As for addressing the supply side rigidities faced by themanufactured products, it said there should be a clear-cut focus oncapacity building in the capital goods segment.

The government must go ahead with the much needed reforms of the'LITPIT' factors imparting labour flexibility, bringing down interestcost, easing burden of indirect taxation, reducing power cost, scalingup infrastructure and ending Inspector raj.

Such a course of action, it felt, would greatly ease the supply side rigidities and contain inflation in the long run.

After hovering within the range of 5 to 5.5 per cent duringAugust-December 2006, the annual rate of inflation for all commodities(WPI) scaled to a two-year high of 6.58 per cent for the week endedJanuary 27, 2007.

UNI

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