Inflation to fall to 5-6 pc by year-end: Montek

MUMBAI: Amid intense speculation about a rate hike by the Reserve Bank in the next month's policy review to check the spiralling inflation, Planning Commission deputy chairman Montek Singh Ahluwalia today said inflation is likely to fall to 5-6 per cent by the end of this year.

"Inflation is too high to be comfortable...it is now decelerating...I am sure that by the end of this year, it will come down to 5-6 per cent," Ahluwalia told reporters on the sidelines of a function here.

The RBI is scheduled to announce its first quarter monetary policy on July 27. Markets and analysts are expecting a further withdrawal of its easy money stance at the review following the better growth numbers. The central bank had already hiked key rates twice since the beginning of 2010.

In April, the wholesale price-based inflation stood at 9.59 per cent, slightly lower than the March number. The RBI has pegged the WPI-inflation at 5.5 per cent in the current fiscal.

Ahluwalia also expressed optimism that economic growth in FY11 will remain a robust 8.5 per cent as projected by the government and above the RBI estimate of 8 per cent.

Earlier in the day, finance minister Pranab Mukherjee had also echoed a similar view saying the economy will grow at 8.5 per cent this year, despite the crisis in the Eurozone economies.

Further, Ahluwalia said the overall interest rate in the is unlikely to rise although short-term rates, which have been lower when the liquidity was in surplus, have started returning to their normal levels. "Overall interest rates are not hardening...the short-term rates are already lower and they are coming back to normalcy...I do not see hardening of the overall interest rates," he said.

He said the Commission has been asked by the Prime Minister to come out with a draft bill on a uniform regulation such as having only one appellate authority for multiple regulatory bodies.

"For each and every sector, there is an appellate authority over the regulatory body. Why do we need so many appellate authorities? Instead, there could be one appellate authority. This could be one of the suggestions in the draft bill," Alhluwalia said.

Alhluwalia said the Plan panel has sent a proposal to the human resources ministry to consider implementation on the PPP model to set up 2,000 model schools.