Inflation to stay high, says Rangarajan

C Rangarajan, the chairman of Economic Advisory Council to Prime Minister, today said that overall inflation would remain elevated for some more time, even as the food inflation will decline with the progress of the monsoon.

“The inflation would remain at a high level for some more time but as the monsoon progresses the food inflation will come down. I expect the overall inflation to come down to 6.5 per cent level by March 2012,” Rangarajan said on the sidelines of a book launch event at IIM-A.

Replying to a query on further possibility of tightening the interest rates, Rangarajan said: “If inflation continues to persist at the high level, I think the Reserve Bank of India will continue with the policy of (monetary) tightening.”

On RBI’s assertion it was not solely responsible for taming inflation, and that other stakeholders should pitch in to curb it, Rangarajan said: “As far as the government is concerned, (its) role is two-fold.”

“One (is) to keep the fiscal deficit low, so that it does not adds to demand pressures. The Union Finance Minister (Mukherjee) has made it very clear that during the current year the fiscal deficit will be maintained at the budgeted levels of 4.6 per cent of the GDP,” he said.

“Second is the role of the government in terms of intervention in the food grains market. Now this was done very effectively last year,” he said.