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Inflation to be 6%, growth 10% soon: Montek

August 10, 2010 16:29 IST

Montek Singh AhluwaliaThe Planning Commission said on Tuesday inflation will come down from the double digits level to about 6 per cent by December and the growth rate will climb to 10 per cent in the near future.

"Around December, the WPI on a year-on-year basis would be close to 6 per cent. There is already some softening taking place.

"A lot of action that is taken is slowly going to roll out," Planning Commission Deputy Chairman Montek Singh Ahluwalia told reporters in New Delhi.

Overall inflation, which has been in double digits for the last five months, was 10.55 per cent in June.

"Indian can achieve 10 per cent economic growth in the near future.. that is going to happen anyway, we have to get the governance right."

The Indian economy grew at above 9 per cent between 2005 -06 and 2007-08. After slowing down in 2008-09 and 2009-10, it is projected to expand at 8.5 per cent in the current fiscal.

 He said the impact of the monetary policy action taken by the Reserve Bank of India in its policy review last month will be visible only after four months.

"Monetary policy takes about four months to have an effect. Whatever was done last week, its main impact would be felt in October," he said.

The RBI, in its first quarter policy review, had raised the short-term lending (repo) and borrowing (reverse repo) rates by 0.25 per cent and 0.50 per cent respectively.

It, however, kept the cash reserve ratio -- the portion of deposits banks are required to keep with with the central bank in cash -- unchanged due to the difficult liquidity position in the markets.

About further monetary measures by RBI, he said, "It is like driving a car in Chandni Chowk. What you have to do three minutes later depends on what is happening to the traffic. I believe that they are moving in the right direction."

He said a normal monsoon and adequate foodgrain production, coupled with the food stocks released by the government, would help cool inflation going forward.

"We have released more food and also monsoon is normal. Food production situation is good. . . that, combined with action we have already taken, will help reduce inflation," he said.

Finance Minister Pranab Mukherjee had earlier said more fiscal and monetary steps could be taken to ease inflation.

The government has taken a host of fiscal measures to maintain adequate supply of food items, including a ban on export of non-basmati rice, wheat and sugar.

At the same time, imports of deficient food items like pulses and edible oil have been made duty-free.

The prime minister has projected inflation to fall to 6 per cent by this year-end, while most policy makers pegged it at 6-6.5 per cent by the end of this fiscal.

Image: Montek Singh Ahluwalia

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