Inflation may ease to 6.5% in December: Rangarajan

Mumbai: A fall in vegetable prices is likelyto ease headline inflation and retail inflation to 6.5 percent and 9.20 percent respectively in December, PrimeMinister's Economic Advisory Council (PMEAC) Chairman CRangarajan said today."Some of the things that have really pushed up inflationare vegetables like onion prices, which have crashed inDecember.

Therefore when December number comes in mid January, we will see retail inflation coming down by 2-2.5 percentagefrom the current level of 11 percent or so. There could be adecline in wholesale price index ... could be the order of 1percentage," Rangarajan told reporters on the sidelines of thesilver jubilee celebration of Indira Gandhi Institute ofDevelopment Research.

[caption id="attachment_1301499" align="alignleft" width="380"] C Rangarajan.[/caption]

Wholesale price-based inflation (WPI) accelerated to 14-month high of 7.52 percent in November, while retailinflation quickened to eight-month high of 11.24 percentduring the month.Going forward, Rangarajan said, the declining trend ininflation will continue and WPI may ease to 6.5 per cent byMarch-end.

"The RBI has estimated WPI to be around 6.5 percent byMarch end. That is the number we are looking at. We will see adecline in December and perhaps it will continue," he said.Quoting an econometric study, the former RBI governorsaid the threshold inflation level is around six per cent, butthere is a need to look at the slightly lower as the level ismuch higher than what many other countries in the world...advanced countries treat as the acceptable level of inflation.

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During his address, Rangarajan said the delay in thecompletion of the projects had resulted in slow economicgrowth of India in the last few years.

"Economic growth has in fact declined much moresteeply than what is warranted by the decline in investment.This may be because projects have not be completed in time orcomplementary investments have not been forthcoming," he said.

PTI