'Q2 growth to be lower than Q1'

Economic growth in the second quarter will be lower than the 8.8 per cent expansion witnessed in the first quarter, Chief Economic Advisor Kaushik Basu said on Monday.

"Growth in the second quarter will not be as high as 8.8 per cent," Basu said at an interactive session organised by the Bharat Chamber of Commerce in Kolkata, adding that it could be well below 8 per cent.

He predicted that the economy would register overall growth of 8.5 per cent in the 2010-11 financial year.

Basu said the good growth in the first quarter was largely on account of a lower base in the corresponding period of the previous year, whereas that was not the case in the second quarter.

Speaking about food inflation, he said the inflation data to be released on Thursday will likely report a 1 per cent drop from last week's level of 11.74 per cent.

Inflation will be lower in the coming months, Basu said, adding that reducing it drastically through policy measures would lead to high unemployment.

Criticising the government's foodgrain distribution policy, he said that the Centre's mechanism was not proper and there was wastage.

Basu suggested that the government could enter into a swap deal with other countries, under which it would sell the foodgrain on the condition that it could buy fresh supplies at a later date.

"This is akin to storing them overseas instead of wasting them here," Basu said.

He also said that selling foodgrains at zero or near zero prices would be of no use, as these would be again resold to the government through the maximum selling price window.

Basu said that pricing of foodgrain should be done carefully so that it was not above the market price and not at a very low level. He also called for changes in labour laws.