Thaindian News

New Delhi, Aug 1 (IANS) Inflation will ease to around 6.5 percent by the end of this fiscal, the Prime Minister’s Economic Advisory Council said Monday, projecting the country’s growth at 8.2 percent for 2011-12.

Headed by former Reserve Bank of India governor C. Rangarajan, the council said while agriculture and industry will grow at a lower rate compared with the previous year, services will expand faster in the current fiscal.

“The inflationary situation and investment slowdown have necessitated a downward revision. The projected growth rate of 8.2 percent, though lower than the previous year, must be treated as high and respectable, given the world situation,” the council said in its economic outlook for 2011-12.

India’s GDP had expanded by 8.5 percent in 2010-11 and 8 percent the year before. For agriculture, industry and services, the council projected a growth of 3, 7.1 and 10 percent for this fiscal respectively.

The panel said as overall inflation would continue to be high, at 9 percent in the July-October quarter, the Reserve Bank of India (RBI) would have to continue with monetary tightening measures.

“RBI will have to continue to follow a tight monetary policy till inflation shows definite signs of decline,” it said, adding that inflation would start to taper only from November.

It also said that achieving the fiscal deficit target of 4.7 percent, as set out in the budget for 2011-12, would be difficult.

The government needed to “redouble efforts to collect larger revenue, resolve cases to reduce tax arrears.

“The high subsidy outgo, especially on account of petroleum products, is placing a serious stress on the centre’s budgeted fiscal position.”

The panel also said that international economic environment was also not entirely supportive of the country’s growth.

Exports were expected to be strong in the first quarter of the fiscal but would ease in the remaining part of the year.