RBI rate hike signals concern over inflation: Planning Commission

The decision of the Reserve Bank to raise interest rates by 25 basis points is not unreasonable and it was a signal to bring inflation under control, said Planning Commission deputy chairman Montek Singh Ahluwalia.

"RBI is signaling their concern about bringing inflation under control. It (inflation) is high. The rate hike is within a range that is not unreasonable", Ahluwalia told reporters in New Delhi.

Ahluwalia expressed optimism that inflation would be down in view of softening of prices across the globe on the  economy and good harvest expected this year. Headline inflation was measured at 9.78 per cent for August on the basis of movement in wholesale prices.

"I think on the supply side also good harvest will have positive effect. My guess is that the global transmission of inflation will also be much less. Taking all things together, I think, the inflation will moderate", he added.

Ahluwalia told Reuters yesterday that the economy was expected to grow 7.5-8 per cent over the next few years if it was "business as usual.''

This is lower than the government's target of around 9 per cent over the next few years, which would see millions of Indians lifted out of poverty.