JOIN US“Inflation currently stands at an uncomfortably high level. Inflation hurts the poor most. Monetary and fiscal policies have to protect the economy from high inflation,” Chairman C Rangarajan told reporters after submitting an update on review of the economy to the Prime Minister.
While projecting the inflation rate to come down to 7 per cent by March end he said “the country has been witnessing high level of inflation for the last 18 months. Macro economic policy and to some extent trade policy must re-anchor inflationary expectations to comfort zone of 4 to 5 per cent.”
Suggesting enhanced focus to boost farm productivity to ease pressure on food prices, Rangarajan hoped the declining trend in food prices particularly that of vegetables would lower food inflation. He also wanted serious efforts to put the economy on path of fiscal consolidation.
Projecting that fiscal deficit outcome for 2011-11, which is pegged at 5.5 per cent of the GDP, could be marginally better tan the budget estimates, Ranagrajan said current year fiscal adjustment might not be a problem.
“The challenge is of adhering to the Thirteenth Finance Commission’s targets of bringing down the fiscal deficit to 4.8 per cent and 4.1 per cent in 2011-12 and 2012-13 respectively with credible expenditure management,” he said. In this context he suggested that exit from ongoing stimulus packages as the need of the hour is “to strengthen the process of fiscal consolidation”. Making a detailed study of performance of the economy in 2010-11 the PMEAC in its report projected country’s GDP to grow by 9 per cent in 2011-12, back to the high rate it had witnessed before onset of the global economic recession. In regard to crucial farm sector, which has an overbearing impact on the overall growth of the economy, the PMEAC projected agriculture sector to grow at 5.4 per cent and 3 per cent in the current fiscal and 2011-12 respectively. “Agriculture will do very well this year. We might have record harvest of wheat,” he said.