Govt, RBI to take all steps to bring inflation down to 4-5%

Govt, RBI to take all steps to bring inflation down to 4-5%

New Delhi: With high prices remaining a concern, Prime Minister’s Economic Advisory Council (PMEAC) chairperson C Rangarajan on Wednesday said all policy measures, like rate hikes and intervention in grain markets, will be undertaken to bring down inflation to comfort zone of 4-5%.

Both monetary and fiscal policies have to be activated in order to contain the inflationary pressure, he said at a conference organised by Institute of International Finance in the national capital.

“The policy is towards control of inflation, taking inflation lower down in the range of 4 to 5%. We will use all policy instruments available, state policy instruments, direct intervention in grain market, as well as fiscal and monetary policy," the PMEAC chairperson said.

Although food inflation declined to 11.49% in second week of February 2011, it still remains a concern for the government.

Besides, the headline inflation at 8.23% in January 2011 is above the comfort level of 4-5%.

Rangarajan, who expects the inflation to come down to 7% by March end, said high growth doesn’t necessarily mean high inflation.

“We do not buy the idea that high growth requires high inflation," he said.

Rangarajan sees inflation as a short-term constraint to achieve 9% growth.

The government has taken several steps like banning exports of certain items like wheat and reducing or eliminating duties on some products to increase their availability in the domestic markets.

The Reserve Bank of India, on its part, has revised key policy rates seven times since March 2010 to tame inflation.