Inflation to dip to 10 pc by December: Rangarajan

NEW DELHI: Expressing optimism that the improved industrial growth in July would continue in the days ahead, Rajya Sabha member and former head of the PM's economic panel C Rangarajan has said inflation may also come down to 10 per cent by December from over 12 per cent at present.

After a dismal performance in the previous two months, the industrial growth recovered to 7.1 per cent in July on account of resurgence in capital and consumer durable goods sectors.

"My estimate is that probably by December, inflation rate may go down to 10 per cent," Rangarajan told reporters on the sidelines of a Ficci seminar on financial inclusion here today.

The former RBI governor said inflation last year was moderate towards the end of December, so base effect will heighten inflation in the current year.

The base effect relates to the impact on inflation because of its level in a year-ago period. If inflation is low in a year-ago period, the comparative inflation in the current year would look higher.

Inflation stood at 12.10 per cent for the week ended August 30 despite moderation for the third week in a row. On recovery in industrial growth in July, Rangarajan said, "Apparently there is some improvement in industrial production. I think this will continue."

There would also be some base effect in the later part of this year, which would push up industrial production, he added.
When asked whether the industrial growth results in July could be taken as the blip, he said "On the whole, I would think there is a positive sign. It should be interpreted as better performance and that would be sustained over the rest of the year."