Managing inflationary pressure biggest challenge: Rangarajan

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Old 25-Apr-2011
Managing inflationary pressure biggest challenge: Rangarajan

Vadodara April 25:

Managing inflationary pressures -- particularly in food grain prices -- was the biggest challenge before the policy-makers, said C. Rangarajan, chairman of the Prime Minister’s Economic Advisory Council, here.

Dr. Rangarajan, a former governor of Reserve Bank of India, was speaking on the topic `the growth path and some concerns on the way’ at a function at Federation of Gujarat Industries (FGI) on Monday. “There are a few areas where immediate engagement of the policy-makers is needed. In the short run, managing inflationary pressures, particularly food grain prices, is the biggest challenge,” he said.

“We also need to watch out what happens to crude prices in the global markets. We must remain committed to maintaining inflation at a low level.” Saying that he did not subscribe to the idea that high growth demanded higher level of inflation, he stated, “We must use all of our policy instruments -- interventions in the grain market, fiscal and monetary policies --to bring down inflation further and re-anchor inflationary expectations to the 5 per cent comfort zone.”

The second concern, he said, was the balance of payments as the current account deficit had remained very high at 3.7 per cent of the GDP in the first half of 2010-11. “Efforts must be made to bring down the current account deficit to a more manageable level of 2.0 to 2.5 per cent of GDP.” This, he said, was desirable to impart much-needed stability on the external payment front and to reduce the risk to domestic economy from volatility in international financial markets. Another critical challenge was fiscal consolidation which was a necessary pre-requisite for sustained growth, he said.

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