RBI likely to continue with tight monetary policy: Rangarajan

NEW DELHI: Prime Minister's Economic Advisory Council (PMEAC) Chairman C Rangarajan today said the RBI will have to continue with its monetary tightening policy to tame inflation, which stood at over 8 per cent in February.

"The inflation rate continues to remain high and therefore, monetary policy will have to remain tight in order to ensure that the inflation rate is brought down," Rangarajan told reporters on the sidelines of the Skoch summit here.

The Reserve Bank of India has revised key policy rates eight times since March, 2010, to tame inflation.

In its mid-quarterly policy earlier this month, the central bank raised the short-term lending and borrowing rates by 25 basis points. The RBI is slated to come out with its quarterly policy review on May 3.

He further said overall inflation is likely to decline to 7.5 per cent in March from 8.31 per cent in February. In the next fiscal, it could decline to 6 per cent.

Meanwhile, food inflation crept back into double digits at 10.05 per cent for the week ended March 12, breaking a three-week long downward spiral.

Talking about the impact of the Libyan crisis on the Indian economy, Rangarajan said it could have impact on crude oil prices, adding, "If the crude oil prices remains at a high level, this could impact government finances and price level."

He expects the Indian economy to grow by 8.6 per cent in the current fiscal and 9 per cent in the next financial year. However, inflation and deficits are constraints to 9 per cent sustainable growth, Rangarajan added.

"I do not subscribe to the view that high growth leads to high inflation," he said.