RBI keeping close watch on inflation

The Reserve Bank of India (RBI) is keeping a watch on inflation, which remained at higher levels on rise in prices of primary articles like food items, RBI deputy governor, Rakesh Mohan, said today.

The inflation, measured in terms of wholesale price index, rose to 5.45 per cent from 5.29 per cent in the week ended November 18. RBI's inflation target for 2006-07 is 5-5.5 per cent.

"The action to deal with inflation due to primary articles should be on supply management front. The recent cut in retail fuel (petrol and diesel) prices will impact (reduce) inflation," Mohan told reporters on the sidelines of a function organised to release a book on indirect tax reforms.

On the pace of economic growth, he said that the high economic growth, as shown by growth in Gross Domestic Product (GDP) of 9.2 per cent in Q2, was a welcome news. "But the farm sector growth rate remains a matter of concern," he added.

The manufacturing sector posted a 11.9 per cent in Q2 of 2006-07. The service sector segments like financing and real estate showed a 9.5 per cent growth.

However, the agriculture, which provides employment to over 60 per cent population, posted a growth of just 1.7 per cent.

Earlier, in his speech, Mohan said that though direct and indirect tax rates were reduced substantially and tax administration was simpler now compared to 15 years ago, tax to GDP ratio remained low in the country.

"There are just one lakh individual tax payers in the category of annual income of Rs 10 lakh and above. The potential tax payers in this income bracket is about six lakh persons and thus, there was huge potential to increase tax collection, he said.