Higher farm output to ease inflation to 6% in FY-12: PMEAC

NEW DELHI: Amid rising concerns over high inflation, the Prime Minister's economic advisory panel has said that the rate of price rise might slow down to around 6 percent in the current fiscal on the back of good farm output .

"I think it (inflation) will be around 6 percent... probably that is where it will settle down," Prime Minister's Economic Advisory Council (PMEAC) Chairman C. Rangarajan said here on Monday.

Wholesale price inflation (WPI) in March rose to 8.98 percent, higher than the Reserve Bank's projection of 8 percent and its comfort level of 5-6 per cent.

"I think the inflation will come down in April. What happened in March was quite unexpected... but the food inflation is coming down. The wheat production is very good.

Therefore, I expect food prices to come down further in April and that should help in the overall headline inflation coming down," Rangarajan said.

RBI Governor D. Subbarao had described inflation as an area of major concern at a recent meeting of the IMF-World Bank in Washington .

"Headline inflation has remained firm despite some moderation in food inflation as generalised price pressures have emerged, with rising inputs costs feeding into manufactured products inflation.

The hardening of global commodity prices,particularly oil prices have further accelerated inflation." the RBI Governor had said.

Rangarajan when asked on the likely impact of rising crude oil prices on inflation, said domestic users have been shielded so far as retail prices for fuels, particularly diesel, have not been adjusted to international crude prices.

"For some more time, probably we might be able to shield the diesel prices from external influences. About 3-4 months from now when inflation rate falls to a much lower level, perhaps we will have to take a decision on what to do with the diesel prices," Rangarajan said.

When asked if the Greece debt crisis could hit foreign capital flows into India, he said that may not have a direct bearing on inflow.

"Total quantum of fund flowing into the emerging market may come down a little bit, but as far as India is concerned what will decide it (inflow) will be the perspective on India's growth and India's strength and I do not think it will be seriously affected," he said.

Food inflation has moderated to 8.28 percent for the week ending April 1, 2011 from 9.18 percent in the previous reporting week. Economic Times