Even as high inflation continues to remain a major concern, Prime Minister's Economic Advisory Council Chairman C. Rangarajan on Monday expressed optimism over a moderation in prices following a good farm output.
Interacting with the media on the sidelines of a conference here, Dr. Rangarajan said: “I think the inflation will come down in April. What happened in March was quite unexpected... but the food inflation is coming down. Wheat production is very good.
“Therefore, I expect food prices to come down further in April and that should help in the overall headline inflation coming down … I think it [inflation] will be around 6 per cent ... probably that is where it will settle down”.
Headline inflation, as per the wholesale price index (WPI) surged to 8.98 per cent in March this year to not only be way above the RBI's (Reserve Bank of India) “comfort zone” of five-to-six per cent but also breach its scaled up projection of 8 per cent for the fiscal year ending March 31.
While rising cost of inputs is already feeding into manufactured products to add fuel to headline inflation, the hardening of global commodity prices, particularly crude oil, is putting further pressure on prices. Dr. Rangarajan pointed out that domestic consumers have largely remained insulated from the impact of the global oil price hike thus far.
“For some more time, probably we might be able to shield the diesel prices from external influences. About 3-4 months from now, when inflation rate falls to a much lower level, perhaps we will have to take a decision on what to do with the diesel prices,” he said.
On the likely impact that the sovereign debt crisis in the Euro zone may have on capital flows in to India, Dr. Rangarajan said: “Total quantum of fund flowing into the emerging market may come down a little bit, but as far as India is concerned, what will decide it [capital inflows] will be the perspective on India's growth and India's strength and I do not think it will be seriously affected.
