New Delhi: With inflation reaching a 42-month high of 7.61 per cent, former RBI Governor Bimal Jalan on Friday cautioned the people against being panicky, and advised policy makers to take hard steps to control price rise even at the cost of some moderation in economic growth.

However, rising inflation could also be a statistical issue, in which case it would disappear itself, he told reporters on the sidelines of discussion on a book authored by renowned economist Avrind Panagariya, organised by FICCI here.

"We may have a growth rate of 7.5-8 per cent, I do not care. But inflation has to come down to five per cent... There are statistical issues in inflation also... But if inflation is a real problem, then we must be able to take decisions which are hard," said Jalan, who is now a Rajya Sabha MP.

When asked what could be the hard steps, he said, "If it is necessary to cut total amount of demand you have to do it. But it is a hard decision... If you take soft decisions, you will not succeed".

To a query whether steps taken by the government are sufficient to take on the rising prices, Jalan said, "They are never sufficient unless inflation comes down".

However, Panagariya, who authored the book titled 'India: The Emerging Giant' , advised policy markers not to over-react.

"There is a little danger of over-reaction. We need to have patience. We are over-reacting to inflation," he said.

Meanwhile, Standard Poor's south and southeast Asia head, R Ravimohan, said inflation is likely to moderate to 5-5.5 per cent by the end of December.

Renowned international trade expert Jagdish Bhagwati said a ban on futures trading in some commodities to tame inflation does not make any sense.
Industry Chamber Assocham also demanded lifting of the ban.

Panagariya, who teaches in the Columbia University, however differed with those advocating moderation in economic growth for taming inflation.

"Are those, calling for moderating growth, sure that inflation would come down by doing so. Is there a trade off (between less economic growth and less inflation)?" he asked.

Jalan said, "You can have high inflation and high growth. There is no contradiction in that. But that will not be beneficial for India".

Quoting Crisil's economic review, Ravimohan said inflation is primarily a supply side issue and good monsoons are expected to bring down the food prices, which have been fueling the price rise.

Panagariya pointed out that relative rise in food prices is a real issue than overall inflation. If relative food prices have risen, the poor should be helped by direct cash transfer, he said.

Opposing the ban on derivative trading in some commodities, Bhagwati said, "Ban on commodities trading does not make any sense, you should forget it. If your intention is to become a financial centre, you do not want to take these measures. They don't help very much and undermine your long term objectives".

On May 7, the Forward Market Commission had slapped a ban on futures trading in potato, gram, soya oil and rubber. Already derivative trading in wheat, rice, tur and urad have been banned.

Demanding lifting of the ban, Assocham President, Venugopal N Dhoot, said it would not serve the intended purpose of taming the inflation and on the contrary result into desperate offloading of stocks of potatoes, chana, rubber and soya.

Dhoot also said inflation will fall in next two months and called upon the people to be patient.

Source : PTI