You cannot manage inflation well in the long-term: ICRA

Excerpts from Midcap Radar on CNBC-TV18 Watch the full show » RELATED NEWS Inflation for week ended April 7 at 6.09% India can sustain economic growth at current levels: JF AMC How inflation affects your investments 'Inflation to hover in 5.75-6% barrier for next 3 mths' Nifty BSE | NSE 25/05/12 Are Mutual Funds betting on Nifty?

Saumitra Chaudhuri, Economic Advisor of ICRA  is suprised at this week's inflation numbers. He feels that next week inflation would be about 6%.

Inflation for the week ended is at 6.09% versus 5.74% for the week ended April 7. This is an eight tick rise since the last week.

Excerpts from CNBC-TV18's exclusive interview with Saumitra Chaudhuri:

Q: Did it come as a surprise to you or were you largely factoring in a 6% plus inflation this week around?

A: This is higher than what I as well as what most people expected. Some increase in the Index was reasonably factored in but that would have given you an inflation of about 5.8-5.9%, but 6% is certainly coming out high.

Q: Does this gives you any reason to believe that RBI may act a little more differently than the consensus estimated at this point of time on Tuesday?

A: I wouldn't think so. If you project forward April-May numbers, inflation would be somewhere in the upper part of between 5.5-6%. Even if it wasn't 6% but would be pretty close to crossing that it would certainly be on the radar.

Q: It has been about 6% for a while. Has it reached a point of concern where the growth starts to come into question in terms of the rest of 2007-08?

A: Growth doesn't come into question. The issue is what happens to growth, when you try to work at bringing down inflation by restricting credit flow to consumer demand. In the short-term, it shouldn't make much of a difference. But in the longer term, if you cannot manage inflation well, it will certainly take out a higher price.

Q: The rise in inflation is primarily coming because prices of primary food articles soared. Going forward, where do you see the problem really pinching us? There has been much talk about how despite efforts inflation doesn't seem to be curtailed and now the Government is focusing on controlling it from the supply side as well?

A: Primary food article prices would go up as these are mostly seasonal vegetables. They go up in the April-June quarter and reach a peak around June 30. I doubt that it is due to primary food articles that the inflation has gone over 6%, but something from the manufactured goods side as well might must have also affected it. If it is only due to foods and vegetables, it will make good headline stories but that is not such a big concern, because once it begins to rain, prices will come down. Let us see what the composition is like.

Q: What would you be watching out over the next week?

A: If it is 6% this week, the next week too it will be around 6%. It is not going to be very different in the weeks of April and will be about the same in every week.