No 7 percent inflation if diesel prices go up: Rangarajan

Last Updated: Thu, Jan 10, 2013 16:10 hrs

Kolkata, Jan 10 (IANS) The country's headline inflation may miss the expected seven percent-mark by this fiscal-end if the central government goes ahead with increasing administered prices of diesel, C. Rangarajan, chairman of Prime Minister's Economic Advisory Council, said Thursday.

"In the normal case, it is expected to come down to 7 percent (at the end of current fiscal). But, some adjustments are being made in the administered prices they may come in the way of headline inflation coming down," Rangarajan told reporters on the sidelines of an event organised by the Indian Institute of Foreign Trade here.

According to the noted economist, WPI inflation cooled down to 7.2 percent in November this year from 10.9 percent in April 2010. The central government's move to hike administered prices of fuel, particularly diesel, might hinder further moderation of inflation in the short run, he pointed out.

Rangarajan, however, said the government would have to take the decision to "correct the prices of diesel" for attaining fiscal consolidation, stating it would be a "right decision" on a medium term.

The Kelkar Committee, appointed by the central government to put forward a roadmap for fiscal consolidation, has earlier suggested immediate hike in fuel prices and complete deregulation of diesel prices. In September last year, the government had hiked diesel prices by Rs.5 per litre.

"Prices (of diesel) need to be adjusted because they are not in line with international crude prices. We have already made some adjustments. But some more needs to be made," Rangarajan said.

He was hopeful that the headline inflation might moderate to six percent in 2013-14.

"I expect the inflation rate to come down to six percent over the next fiscal," he added.

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