Govt, RBI to take steps to bring down inflation to 4-5%

With high prices remaining a concern, Prime Minister's Economic Advisory Council chairman C Rangarajan on Wednesday said all policy measures, like rate hikes and intervention in grain markets, will be undertaken to bring down inflation to comfort zone of 4-5 per cent.

Both monetary and fiscal policies have to be activated in order to contain the inflationary pressure, he said at a conference organised by Institute of International Finance here.

"The policy is towards control of inflation, taking inflation lower down in the range of 4 to 5 per cent. We will use all policy instruments available, state policy instruments, direct intervention in grain market, as well as fiscal and monetary policy," the PMEAC chairman said.

Although food inflation declined to 11.49 per cent in second week of February, it still remains a concern for the government.

Besides, the headline inflation at 8.23 per cent in January is above the comfort level of 4-5 per cent.

Rangarajan, who expects the inflation to come down to 7 per cent by March end, said high growth doesn't necessarily mean high inflation.

"We do not buy the idea that high growth requires high inflation," he said. He sees inflation as a short term constraint to achieve 9 per cent growth.

The government has taken several steps like banning exports of certain items like wheat and reducing or eliminating duties on some products to increase their availability in the domestic markets.

The Reserve Bank of India, on its part, has revised key policy rates seven times since March 2010 to tame inflation.