Inflation will ease to 5.5%, says PM panel

Pegs GDP growth at 8.5-9 pc for fiscal

Besides, the PM panel also sees the country to achieve a GDP growth rate between 8.5- 9 per cent in the current fiscal.

“I think by March (2011), we can expect (WPI) inflation to come down to 5.5 per cent,” Rangarajan said on the sidelines of the 93rd annual conference of Indian Economic Association here. “I think any level of inflation beyond 5 per cent (threshold level of inflation) is uncomfortable,” he asserted.

On the hardening of interest rate in January in the wake of double digit food inflation, Rangarajan said it would depend upon how inflation behave in coming weeks. “It (rate hike) all depends upon how overall inflation behave in coming weeks ... I think if there is further fall in WPI inflation then Monetary Policy would remain as it is now ... they (RBI) have not made any change in policy rate ... we need to watch the behaviour of overall inflation before monetary authorities can take any decision,” he said.

Public expenditure

Asked about the GDP growth, Rangarajan said against the forecast of 8.5 per cent, the country could achieve higher growth. “We had forecast the GDP of 8.5 per cent we will achieve 8.5 per cent ... perhaps we will do better than that ... I expect growth rate between 8.5 and 9 per cent,” he said. On being asked about when liquidity situation would ease, he said that liquidity situation would improve in the last quarter of the current fiscal on the back of increase in public expenditure and RBI’s recent measures.

“RBI has already taken some measures to ease liquidity ... to some extent liquidity was strained because of payment of taxes ... I think liquidity situation will considerably improve in last quarter of this fiscal when public expenditure rises with measures taken by RBI.”

“Looking at constraints on growth, there are two sectors which must be focused on first is agriculture and second is infrastructure particularly power,” he said.

“Agriculture growth is necessary important from the point of view of reducing poverty in the country and for a more balanced regional development and for food security. In the field of infrastructure, power generation is important and we need to add capacities of sufficient order to enable economy to grow at 9 per cent,” he said.

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