Reserve Bank of India Governor Y V Reddy expressed confidence, on Monday, that the bank would be able to slow inflation down to closer to 3 per cent well before the timeframe of its midterm inflation goal of 4 to 4.5 per cent.
RBI aims to keep inflation close to 5 per cent this fiscal year, and had set a goal of bringing it down to 4.0 to 4.5 per cent in the midterm. “Well before medium term, we should be able to bring it closer to 3 per cent,’’ Mr Reddy said in a panel discussion at a symposium in Tokyo on India’s economy.
India’s annual inflation rate fell below 5.5 per cent in early May for the first time in five months after running above 6 per cent for most of this year. Bank of Japan Governor Toshihiko Fukui said he saw signs of increasing inflationary pressure in India.

More steps mooted
But in the longer term, India needs to take further steps to make its regulation and tax codes more effective, balance its need for both fiscal consolidation and building infrastructure, and create flexible labour market, he added.
“India will need to overcome those medium-term challenges to continue achieving sustainable high growth, while appropriately controlling inflationary pressure,’’ he said, adding India’s manufacturing sector is becoming competitive and gaining profitability, catching up with its strong service sector.
“I think the potential for the Indian economy to achieve sustainable growth will increase if it moves to a more balanced economy with manufacturing and service sectors both working as the engines for growth,’’ Mr Fukui said.
Mr Reddy said the RBI expects the nation’s economic growth to slow to 8.5 per cent in the financial year to March 2008 from 9.2 per cent in the previous year, reflecting an expected slowdown in global economic growth. Mr Reddy reiterated that the RBI is aiming to bring down annual inflation to close to 5.0 percent in the financial year ending March 2008, below the average rate of 5.4 per cent in the last fiscal year. The level of India’s inflation “cannot be too much out of alignment’’ with that of global economy as the nation gets increasingly integrated with the rest of the world, he said.

GDP GROWTH
India set to surpass Japan
Tokyo, AFP: India’s economy will overtake the Japanese economy by 2025 to rank third in the world after the United States and China in terms of purchasing power parity, Japan’s central bank chief predicted on Monday.
Bank of Japan Governor Toshihiko Fukui also urged India to loosen restrictions on capital flows and develop domestic bond markets so as to further integrate itself into the global economy.
“Everyone recognises the large and varied influence India is having on the world,” he said.
“If we extend the current (growth) rate, India’s purchasing power parity will exceed that of Japan by around 2025 and will rank third after the United States and China,” he added.