Govt, RBI should take steps to tame inflation: PMEAC

Written by: Pti
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New Delhi, Feb 21 (PTI) Warning the inflation is at"uncomfortably high" level, the Prime Minister''s EconomicAdvisory Council (PMEAC) today said the Government and the RBIshould take steps to tame the rate of price rise.

"Inflation currently stands at uncomfortably high level.

Monetary and fiscal policies have to be appropriately tight toprotect the economy from inflation," PMEAC Chairman CRangarajan said while releasing ''Review of the Economy2010-11.''

He said the monetary policy has an important role to playand expects the central bank to continue with its measures tocontrol inflation.

"There is a need to maintain tight monetary policy. Webelieve monetary policy has an important role to play," PMEACsaid.

The RBI is scheduled to come out with its mid-quarterlyreview of monetary policy on March 17.

The central bank hiked its short-term lending andborrowing rates by 25 basis points during its third quarterlyreview last month to tame inflationary pressure. In 2010, theRBI raised the rates six times.

Meanwhile, the PMEAC revised upwards its inflationforecast for March-end to 7 per cent from 6.5 per centestimated earlier.

On the prevailing high inflation, Rangarajan said,vegetable prices have began to normalise from the last week ofJanuary onwards.

"The headline rate on this count is expected to come downfurther during February and March 2011 to about 7 per cent,"he said.

While the food inflation had touched 18.32 per cent inDecember, 2010, before moderating to over 11 per cent thismonth, the overall inflation still stood above eight per centas against the comfort level of 4-5 per cent.

The PMEAC said further decline can be expected during firstquarter of 2011-12 and the combination of appropriate policiescan create conditions conducive to bringing back the economyto 5 per cent inflation level.

Referring to the external conditions like sovereign debtproblem in eurozone, high global food and crude oil prices,the PMEAC said this once again underscores the importance ofpursuing domestic policies that factors in some adversedevelopment in international sphere.

"On the domestic front, the principal challenges in theshort to medium term is inflation management. Both monetaryand fiscal policy are integral to this," Rangarajan added.

On a query regrading the appropriate time to free dieselprices from government control, he said, "In my personalopinion, I think it could be done when inflation reaches 6 percent." PTI BSP NKD KKS

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