With improvement in food price situation, Prime Minister's economic advisory panel today favoured rate cuts by the Reserve Bank and hoped headline inflation, too, will fall below the projected 7% by March- end.
The Prime Minister's Economic Advisory Council (PMEAC) Chairman C Rangarajan said that the economic growth forecast for the current fiscal would be around 7%.
"I expect headline inflation could come down even below 7% by March-end," he told reporters on the sidelines of a Skoch event here.
As per official data, food inflation for the week ended December 24 turned negative to (-) 3.36%. The headline inflation numbers for December would be available next week.
"It (the decline in food inflation) was in many ways expected because last year in December and January vegetable prices rose to an abnormally high level," he said, adding that the numbers would decline in the coming months as well.
The Reserve Bank and government has already projected headline inflation to be around 7% by March end.
The figure stood at 9.11% in November.
Rangarajan said RBI has already given indication in its previous monetary policy that it would pause the interest rate hike cycle. The RBI has already hiked interest rates 13 times since March 2010 to control inflation.
"We have to wait for December inflation figures to see if the non-food manufacturing numbers have also followed the same path. The December numbers will indicate when and how RBI will act," he said.
Rangarajan also made a case for reduction of the interest rates by the RBI in its monetary policy review later in the month. "The environment appears to be in favour of the Reserve Bank reversing its monetary policy stance," he said.