Inflation to ride high till March: Rangarajan
09 Nov 2011
Headline inflation will continue to be high through the rest of the fiscal year, but should come down to around 7 per cent by March next year, C Rangarajan, chairman of the Prime Minister's Economic Advisory Council (PMEAC) said on Tuesday.
Apart from other factors like supply constraints, he hinted that the high inflation was also due to irrational prices of petroleum products. These were in the process of being rationalised, he said at a function organised by the Federal Bank in Kochi.
He also said the government was keen to deregulate the prices of non-petrol fuels like diesel and LPG (cooking gas), but the time was not ripe for this. "The government is waiting for an appropriate time to deregulate the prices of diesel and LPG,'' he said.
Asked whether it was possible to bring down the price of petrol by cutting down duties, he said that it would lead to other problems. "We are already committed to a very large level of government expenditure and we need funds for many socio-economic programmes like the employment guarantee scheme. These programmes are difficult to run without petroleum duties," he said.
He also said the country should quantify inflation based on retail price index (RPI) like developed nations do, instead of the wholesale price index (WPI), which is currently used. "WPI is often used because the statistics are easily available. Policy makers should use RPI whenever it is available," he said.
Managing inflationary pressures was the biggest challenge before the government, he added.
