Not surprised if RBI increases rates by 25%: Rangarajan

With a spike in food inflation, C Rangarajan, Chairman of Economic Council to the Prime Minister, today said he would not be surprised if RBI hikes the rate by 25 basis points to contain it. 

Replying to a question about whether he expected another hike in the rates due to the increase in food inflation, Rangarajan said, "I will not be surprised if the RBI raises the rate by 25 basis points".  

Driven by high prices of fruits, milk, meat, eggs, India's food inflation crossed 17% for the week-ended January 22.

Rangarjan, who was speaking on the sidelines of a book release function organised by Southern India Mills Association, said RBI would continue to act as long as there was a need to contain the rapid escalation in food prices.

He said food inflation was expected to decline.  

With the good monsoon, he said, the situation was already improving; prices of fruits and vegetables had already started declining and by middle of February, it would decline further.  

He added the overall inflation would also come down to 7 per cent by March.

To another question on removing restrictions on FDI to attract more investments, he said the restrictions differed from sector to sector and the government would examine what could be done over the issue.