Inflation could decline to 7 pc by March: Rangarajan

"There could be an improved situation with respect to food items and articles, because there was good monsoon. Therefore, with the moderation in the vegetable prices in the first three months of the next year, the inflation may come down to 7 per cent," he told reporters here.

Rangarajan, who was here at the Institute of Development and Research in Banking Technology, was of the view that with another good monsoon, inflation may come down further to 6 per cent in the next fiscal.

He said the movement in global commodity prices, and not the declining value of rupee against dollar, will have bigger implications for inflation which is hovering near the double- digit mark since December.

On fiscal deficit, he said dollar appreciation against rupee could force the fiscal deficit upwards of the projected 4.6 per cent of GDP for the current financial year. He said with the weakness of the rupee persisting, subsidies from the Government to oil companies may remain high.

"I had mentioned some months ago that it is going to be very difficult to achieve the fiscal deficit of 4.6 per cent. I believe that it is tough as the international commodity prices, which were expected to come down, have not come down.

"And therefore the under-recoveries of the oil companies are high. Therefore it may be necessary to provide additional subsidies to them," he said.