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Headline inflation based on the Wholesale Price Index (WPI) is expected to be between 6 and 6.5 per cent in December, C. Rangarajan, Chairman of Prime Minister’s Economic Advisory Council, said here on Friday.
Inflation has “peaked out” and WPI will moderate following a “sharp fall in vegetable prices”.
By March, WPI inflation is expected to be between 6 and 6.5 per cent levels, he said.
“...there are already indications that in December vegetable prices have come down very sharply. Therefore when December numbers (WPI) are available in the middle of January, I expect the inflation rate to come down by 1-1.5 percentage points,” he told Business Line .
Rangarajan was here to attend the convocation ceremony of the Indian Statistical Institute (ISI). He is also the President of ISI.
Inflation, he said, was fuelled by rise in the price of vegetables and food articles “other than foodgrains”.
WPI accelerated to a 14-month high of 7.52 per cent in November, while retail inflation increased to an eight-month high of 11.24 per cent during the month.
December WPI numbers are expected later this month.
A sharp fall in inflation could give leeway to the Reserve Bank of India (RBI) on the rate front, he said.
“I think they will wait for the actual inflation numbers to come and if inflation numbers come down quite significantly then it will give some room for monetary authorities,” said Rangarajan, a former RBI Governor.
After two consecutive rate hikes in the previous two monetary policy reviews, the RBI had left the policy rates unchanged in December.
Growth pick-up According to Rangarajan, growth too is expected to pick up in the next fiscal to around 6-6.5 per cent. For the current fiscal though it is likely to remain around 5 per cent.
“I expect the growth rate next year to be between 6 and 6.5 per cent,” he said.
Faster completion of projects even at the current investment and savings rate would help the economy grow at around 7.5 per cent.
Investments During his speech Rangarajan pointed out that a sharp decline in investment has been the reason for the fall in growth rates. Non-availability of critical inputs such as coal and power was also another reason, he said.
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