FM sees inflation at 5-6% in coming months

Finance Minister Pranab Mukherjee today said inflation rate will come down to 5-6 per cent in the coming months as prices of essential items have started moderating.

"The inflation rate of some of essential items is moderating. I am very optimistic that inflation rate will come down to a moderate level of 5-6 per cent in the coming months," Mukherjee said while addressing the industry captains at a function organised by industry chamber Ficci here.

The overall inflation has been in double-digits for four months with the June figures standing at 10.55 per cent.

On the economic growth, Mukherjee exuded confidence that GDP will grow at 8.5 per cent in the current fiscal (2010-11), provided the services sector fares well.

"The services sector contributes about 57 per cent to our GDP and it has to register double-digit growth for a significantly higher overall growth rate. An over 8.5 per cent overall growth will depend on a higher growth rate of the services sector," he said.

The economy grew 7.4 per cent during 2009-10. Following the global economic crisis, growth rate slipped from over 9 per cent in the previous three years to 6.7 per cent in 2008-09. The economy, however, started picking up following the stimulus packages given by the government and the Reserve Bank to boost demand and increase liquidity.

Mukherjee said the industrial sector has shown an "impressive recovery" since the recent past. The industrial output in May stood at 11.5 per cent.

On the still high food prices, he said, items like pulses and milk have been contributing significantly towards high food inflation. Food inflation for the week ended July 10 declined marginally to 12.47 per cent.

"All efforts are being made to increase availability of these (pulses and milk) items and the government has already put in place a long-term strategy to increase production of these items," he said.