"This (inflation) is a reflection of demand exceeding supply, to some extent it is a sign of growing prosperity of the country," Singh said here in a press conference on the sidelines of the G-20 meet.
"If our national income is increasing at the rate of 8 per cent per annum and population is increasing at the rate of 1.6% per annum. So, the per capita income of country is growing at 6.5% to 7%. It is bound to lead to demand for more diversified food basket," he added.
However, Singh also conceded that "inflation is a problem".
The headline inflation measured in terms of wholesale price index (WPI) has been above 9% mark since December last year and stood at 9.72% in the month of September.
Food inflation rose to 12.21% for the week ended October 22, despite the steps taken by the government and the Reserve Bank to check the price rise.