Inflation will ease in 2011-12’s second half: Minister

August 23rd, 2011 - 9:55 pm ICT by IANS  

New Delhi, Aug 23 (IANS) Monetary tightening and easing demand-side pressure would help moderate inflation in the second half of the current fiscal, Minister of State for Finance Namo Narain Meena told parliament Tuesday.

The minister said economic growth was expected to slow down to 8 percent in 2011-12 from 8.6 percent in the previous year.

“Growth is expected to decelerate from 8.6 percent in 2010-11 to around 8 percent in 2011-12, which should contribute to some easing of demand-side inflationary pressures, particularly in the second half, as the full impact of monetary tightening is realised,” Meena said in written reply to a question in the Rajya Sabha.

The Prime Minister’s Economic Advisory Council, headed by C. Rangarajan, recently pegged the GDP growth for 2011-12 at 8.2 percent against the budgetary estimate of 9 percent (plus-minus 0.25 percent).

Meena said the Reserve Bank of India has taken measures to curb inflationary pressure by moderating demand.

In its monetary policy review July 26, the RBI hiked key policy rates by 50 basis points. The repurchase rate, the interest the central bank levies on short-term borrowing by commercial banks, has been hiked to 8 percent from 7.5 percent and reverse repurchase rate, or interest paid on short-term lending, raised to 7 percent from 6.5 percent.

Despite 11 consecutive rate hikes, inflation has remained stubbornly high, almost near double-digit, much above the central bank’s comfort level of 4-5 percent.

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