C. Rangarajan, Chairman of the Prime Minister's Economic Advisory Council, has said that the Wholesale Price Index (WPI) was likely to come down to 7 per cent by March next year.
He was speaking on ‘The Indian economy — prospects and constraints' at the commemorative lecture organised by the Fedbank Hormis Memorial Foundation here on Tuesday.
Inflation continues to remain an area of concern in the current year. As of September 2011, the headline inflation in WPI stood at 9.7 per cent. Primary food inflation is still fairly high.
“The rationalisation process in the pricing of petroleum products is still to be completed and this may have an impact on price levels in the coming months. The headline WPI inflation would remain high till December 2011. One could expect significant easing in the last quarter of the fiscal year and inflation may come down to 7 per cent in March 2012,” he said. Mr. Rangarajan said the extraordinarily high level of inflation seen in the last two years was due to certain supply constraints, particularly of agricultural products. The fact that inflation was triggered primarily by supply side shocks did not mean that monetary policy had no role to play in such conditions.
The series of actions taken by RBI to raise the policy rate to control inflation should be understood in this context, he said.
Taking the audience through the economic reforms from 1991 to the current year, he said the industrial production had been subdued in the last few months.
The current year GDP growth rate is fluctuating between 7.5 to 9 per cent.
While growth rate is important, it is also important to know who benefits from the growth. There is a need to ensure that the growth process is such as to include every section of economy.
The coming decade is significant for India as it will transform the country from a low income country to a middle income one, he said.
Shyam Srinivasan, MD and CEO of Federal Bank; P.C. Cyriac, chairman of the Board, Federal Bank Limited; Raju Hormis, P.V. Mathew, P.P. Varghese, trustees of the foundation; were among those present.