The Hindu Business Line : Inflation is matter of concern: Rangarajan

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New Delhi Jan. 19 The Chairman of the Prime Minister's Economic Advisory Council, Dr C. Rangarajan, on Friday expressed concern over the wholesale price index (WPI)-based annual inflation rate substantially exceeding the 5.5 per cent level, which is the outer limit of the inflation range projected by the RBI for the current fiscal.

The RBI had projected the inflation rate for the current fiscal to be in the 5-5.5 per cent range.

The latest official data released on Friday showed the WPI-based inflation at 6.12 per cent for the week ended January 6 — the highest in two years.

Controlling Inflation

"It's a matter of concern. Because, inflation beyond 5.5 per cent is a concern as it is really putting problems on exchange rates... ," Dr Rangarajan said, when asked whether the inflation topping 6 per cent was a matter of concern. He said that the trend was in the direction of inflation acceleration due to both supply constraints as well as the enlargement of demand.

"The answer lies in both expanding the supplies and controlling the money supply," Dr Rangarajan said. Stating that the RBI's recent action to hike cash reserve ratio (CRR) was right one, Dr Rangarajan highlighted that all monetary actions take sometime for the effect to be felt. "Therefore, I think it (CRR hike) will have the desired effect," he said.

GDP Growth

Earlier, addressing a meeting organised by the Confederation of Indian Industry and the Columbia Business School, Dr Rangarajan said that India's Gross domestic product would grow between 8 per cent and 9 per cent this fiscal. "Closer to 9 per cent than 8 per cent," he said.

Speaking on the occasion, the Union Finance Minister, Mr P. Chidambaram, said that the GDP growth would definitely cross 8 per cent this fiscal. "We will for the fourth year record over 8 per cent growth," he said. India's GDP grew 9.1 per cent in first half of the current fiscal.

"If tax collections are any indications, I expect the Q3 to return robust growth," Mr Chidambaram said. In the second quarter of the current fiscal, the country's GDP grew by 9.2 per cent.