Indian PM maintains optimistic inflation forecast

By C.J. Kuncheria

NEW DELHI, July 24 (BestGrowthStock) – Indian Prime Minister
Manmohan Singh on Saturday reiterated his prediction headline
inflation would ease to 6 percent by December, a forecast more
optimistic than that delivered by his economic advisers a day
before.

The prime minister’s Economic Advisory Council had said
inflation would be at 7-8 percent by the year-end, compared
with 10.55 percent in June, and its chairman recommended strong
monetary action to tame runaway prices. [ID:nSGE66M0B8]

Singh’s statement comes amid a growing divergence between
the government and the central bank on the need for monetary
tightening to cool inflation that has been in double digits for
five straight months. [ID:nSGE66L09O]

New Delhi puts high food prices as the cause and argues
normal monsoon rains would cool inflation, while the Reserve
Bank of India (RBI) says demand-side factors will continue to
keep up pressure on inflation.

On Saturday, Singh backed his officials’ view.

“The present high rate of inflation is mainly due to food
price inflation,” he told a conference of top federal and state
policymakers gathered to assess the country’s development
plans.

“The government has taken a number of steps to curb
inflation. With a normal monsoon, which is the expectation at
present, the rate of inflation will abate in the second half of
the year.”

The RBI is widely expected to raise rates by 25 basis
points for the fourth time since March when it reviews policy
on Tuesday and many observers see the main lending rate rising
to 6-6.25 percent by end-December from 5.50 percent.

Singh also called for cutting subsidies and reducing losses
at state-run firms to shore up public finances needed for
development.

“The financing of the plan expenditure has depended far too
much on debt. That must change.”

India plans to reduce its fiscal deficit to 4.1 percent of
GDP by end-March 2013 from the projected 5.5 percent for this
year and to cut its debt to GDP ratio to 68 percent by
end-March 2015 from around 80 percent.

Stock Market Research

(Editing by Sugita Katyal)

Indian PM maintains optimistic inflation forecast