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  • Inflation to moderate to 6.5pc by March-end: PMEAC

    Published on May 13, 2011

    The Prime Minister’s economic advisory panel has said it expects inflation to moderate to 6.5 percent by the end of the current fiscal from 9 percent at present despite a likely increase in fuel prices.

    “If the monsoon is normal, then the food inflation will come down. However, the fuel prices could go up. Allowing for some increase in fuel prices, inflation could come down to 6.5 per cent by the end of this fiscal,” Prime Minister’s Economic Advisory Council (PMEAC) Chairman C Rangarajan told a news agency.

    Rangarajan also expects headline inflation in April 2011 to decline from 8.98 percent in the previous month. However, he expects inflation to remain high in the next few months.

    “The April inflation will be somewhat lower than March inflation. But inflation will remain at an elevated level in the next few months,” Rangarajan said.

    He also pitched for a “substantial” increase in prices of petroleum products in line with the rising crude prices in the international market.

    Persistently high inflation has started affecting the country’s economic growth, with the RBI projecting a GDP growth rate of around 8 percent in the current fiscal as against the government’s earlier estimate of 9 percent.

    Food inflation dropped to 7.7 percent for the week ended 30th April, the lowest level in the last 18 months, due to a fall in the price of pulses and vegetables, especially potato.

    The Reserve Bank has been trying to rein in price rise by raising its lending (repo) and borrowing (reverse repo) rates.

    The RBI has hiked key rates nine times since March 2010, to balance the trade-off between growth and inflation.

    The central bank raised both rates by 50 basis points in its annual credit policy review on 3rd May.