Economists met finance minister Pranab Mukherjee to extensively discuss food price inflation, continuation of

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stimulus and discus the importance of investment crisis. A day after official data released by the ministry of commerce and industries put inflation at 7.31 per cent for December, economists who met Mukherjee as part of the pre-budget exercise, economists expressed their surprise over the inflation figures.

Former chief economic advisor Nitin Desai said that inflation was on account of expectations, while Delhi School of Economics’ professor Partha Sinha expressed his utter disbelief in the December figures.

“The poorer are affected most in situations like this. If it is just a matter of 2-3 months it is not a constraint, but if it is structural long-term issue, then there is a serious problem,” said Sinha. He also remarked that this year the budget was going to be a difficult task for the finance minister. “Last year, we knew there was going to be a trade-off between growth and inflation. But this year, we don’t know what the tradeoffs are. The FM is keeping his cards very close to his chest,” said Sinha.

Economists including NIPFP director M Govinda Rao, CERG Advisory’s Onkar Goswami, professor of Institute of Economic Growth Bina Agarwal among others also asked the finance minister to continue with the fiscal stimulus until firm economic recovery.

“I would say that the general trend of the people was that it is not the time to withdraw the stimulus. It is the general feeling of the economists,” said Desai after the two-hour interaction. Govinda Rao also said the stimulus should continue till economy recovers but at the same time fiscal consolidation should be taken care of.

Among new measures that could be expected in the union budget to be tabled on February 26 is a Tobin-type tax, which is the tax or levy on all trade of currency across borders. Tobin tax is intended to put a penalty on short-term speculation in currencies. Economists have also suggested that tax consessions, part of the government’s extraordinary measures during the time of economic downturn, be withdrawn.