Dr. Rangarajan too sees GDP growth below 8%

The Indian economy will grow at less than 8% rate in the current fiscal year due to a sharp slowdown in the industrial production, Chairman of the Prime Minister’s Economic Advisory Council (PMEAC) Dr. C. Rangarajan said on Thursday. The PMEAC, which provides economic forecasts twice a year, has predicted a growth of 8.2% for the fiscal year ending in March 2012. Finance Minister Pranab Mukherjee on Wednesday said that India's economy will grow less than 8% in the current fiscal year. Dr. Rangarajan said that the Government needs to use both fiscal and monetary tools to rein in inflation to maintain high growth. "When inflation is remaining at the level which is way above the comfort level of central bank, therefore in that situation it becomes absolutely essential for the central bank to act," Rangarajan said at a conference in New Delhi.



"Slow growth in industrial production should not be entirely put at the door of rising interest rates," Dr. Rangarajan said, adding that the primary responsibility of the central bank is to tame inflation. "Inflation remains way above what is considered as the comfort level of inflation," he said. The RBI has hiked its key lending rate 12 times since March last year. It is likely to increase rates yet again at a review of the monetary policy on October 25. Dr. Rangarajan added that the repo rate prevailing today is still lower than the pre crisis level of 2008. Repo rate is the rate at which the RBI gives credit to the banks. He expects inflation to start moderating from December. It is expected to come to down to 7% by March end. Meanwhile, food inflation surged to nearly a six-month high of 10.60% for the week ended October 8.