The Prime Minister’s Economic Advisory Council (PMEAC) Chairman, Dr C. Rangarajan, has said the RBI will have to continue with its monetary tightening policy to tame inflation, which stood at over 8 per cent in February.
“The inflation rate continues to remain high and therefore, monetary policy will have to remain tight in order to ensure that the inflation rate is brought down,” Dr Rangarajan told reporters on the sidelines of the Skoch summit here today.
The Reserve Bank of India has revised the key policy rates eight times since March 2010 to tame inflation.
In its mid-quarterly policy review earlier this month, the central bank raised the short-term lending and borrowing rates by 25 basis points. It is slated to come out with its quarterly policy review on May 3.
He further said that the overall inflation is likely to decline to 7.5 per cent in March from 8.31 per cent in February. In the next fiscal, it could decline to 6 per cent.
Meanwhile, food inflation crept back into double digits at 10.05 per cent for the week ended March 12, breaking a three-week long downward spiral.
About the impact of the Libyan crisis on the Indian economy, the PMEA Chairman said it could have impact on crude oil prices, adding, “If the crude oil prices remains at a high level, this could impact government finances and price level.”
He expects the Indian economy to grow by 8.6 per cent in the current fiscal and 9 per cent in the next financial year. However, inflation and deficits are constraints to 9 per cent sustainable growth, he said.
“I do not subscribe to the view that high growth leads to high inflation,” he added.