Inflation to come down to 6 per cent in 4 months: Rangarajan

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Berhampur (Orissa), Jun 6 (UNI) Notwithstanding the hike in fuel prices, the inflation will come down to about 6 per cent in the next three to four months from an uncomfortable level of 7.8 per cent, Chairman Economic Advisory Council to the Prime Minister Dr C Rangarajan said here today.

''Amidst the indication of a normal monsoon this year, if the rains are good, then we hope to see inflation rate come down further and remain at around 5.5 per cent,'' he said while addressing the 16th convocation of Berhampur University.

The Indian economy, he said, had undergone some rapid changes in the last 15 months. At one point, inflation had touched as low as 3 per cent.

But then there was a reversal of situation since the beginning of 2008. In the first quarter of 2008, inflation rate raised steeply and in mid -May, it touched an uncomfortable level of 7.8 per cent, Dr Rangarajan stated.

He attributed the rise in inflation to domestic and international factors. Globally, prices and more particularly food prices have been rising due to supply factors.

''While drought in Australia has reduced considerably, the availability of wheat, the diversion of corn for the purpose of bio-fuel had reduced the availability of corn for food consumption.

Besides food prices, oil prices have risen sharply. Domestically, there had been a significant expansion of money supply in recent years,'' he observed.

Among manufacturing goods, the two commodities iron-steel and cement had shown substantial rise. Iron ore prices in sympathy with the movement in international prices had gone up steeply. For the past 3 years and more money supply have been growing at an annual rate exceeding 20 per cent and this has injected significant liquidity into the system, Dr.Rangarajan said and projected a growth of 8.5 per cent for 2008-09 in January.

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