Global slowdown to hit economy, inflation to moderate from December: Pranab Mukherjee

NEW DELHI: Finance Minister Pranab Mukherjee today said the global slowdown will impact India's growth prospects, but expressed hope that inflation will start moderating from December.

However, he maintained that the Indian economy growing at 8 per cent, down from 8.5 per cent in 2010-11, will still be a "reason for celebrations".

Referring to the growth prospects for the current financial year, the minister said it would be impacted by the global economic slowdown. "The news that India would grow annually at 8 per cent would be a reason for celebrations," he said at the annual conference of Economic Editors here.

Mukherjee attributed both the economic slowdown and rising inflation to global economic problems, especially the rising price of crude oil in international markets, which has remained high at around USD 105 a barrel.

He attributed near double-digit inflation mainly to rising global commodity prices.

"Inflation remained sticky around 9 per cent... I expect the overall WPI inflation to decline from December and I am hopeful that we will end the fiscal with 7 per cent," he said.

Despite monetary measures taken by the Reserve Bank since March, 2010, headline inflation has remained stubbornly close to the double-digit mark. It was 9.78 per cent in August.

Moreover, he added, the tight monetary policy followed by the RBI has also impacted growth during the current fiscal. The economy recorded a growth rate of 7.7 per cent in the first quarter (April-June 2011-12), the lowest in 18 months.

In a bid to contain inflation, the RBI has raised key policy rates twelve times since March, 2010.