Inflation at 5-6% ideal for Indian economy: Pranab

Inflation at 5-6% ideal for Indian economy: Pranab

Washington: Amid all-out efforts by the government and RBI to tame inflation, now hovering around 9%, finance minister Pranab Mukherjee on Tuesday said it would be ideal for the economy if it is managed at 5-6% level.

“To be very frank, what shall be acceptable and what can be a tolerable level of inflation is very difficult to define. But in our economy, we feel that if we can keep inflationary pressure within 5-6%, it could be ideal, but we can live with 6 to 6.5%," Mukherjee said while addressing business delegates from India and the US here.

He added the inflation in 2011 will be a little more.

Overall inflation climbed to 9.06% in May from 8.66% in the previous month, fanning fears that high rate of price rise could hurt the economic growth.

Mukherjee said the current inflation level was due to high global commodity prices.

“(Inflation is) not because of near supply constraints on the agricultural front ... But the international commodity prices, including food and fuel, is causing severe constraints," he said.

Mukherjee said food prices have started coming down and the government has also tried to cushion the impact of rising crude prices by sacrificing central taxes. Besides, state governments too have been asked to reduce their taxes on fuel.

“I do have hope that it will have some impact. But this (inflation) is going to be a major problem and it would have its impact on the overall growth scenario," he said.