Inflation likely to be 6-7% by March end: Chief economic adviser

The government expects inflation to be between 6 and 7% by the end of the current fiscal, slightly higher than predicted earlier, chief economic adviser Kaushik Basu said today.

He also said the economy may not be "out of the cloud" yet because of the rising food prices internationally, and the US-China currency war.

"Earlier, we had predicted that inflation will be 6% or less by the year end, but now, it may be between 6 to 7%," Basu said at the annual general meeting of the Merchants Chamber of Commerce.

Stating that situation was better now, he said that inflation rate based on the WPI (Wholesale Price Index) and the three Consumer Price Indices had fallen below 10% this August, after a gap of 16 months.

Compared to December and January of the last fiscal, inflation now was in single digit, he added.

Basu said, however, "we are not yet out of the cloud", mainly because of rising food prices internationally and the Asean countries' putting up a 'wall' against the effects of the US-China currency war, whose effects may hit India.

"If that happens, inflation will go down, but slower than expected," Basu said.

Pointing out that economic growth stood at 8.9 per cent in the first two quarters of the current fiscal, he said that if the European economy steadied, the country could be on the 9% growth path.

He said although India's economy growing faster than that of China had become a reality for the first time, the extent of poverty in the country was unacceptable.

"Just throwing money is not enough. In reaching out to the bottom, we need well-designed programmes with minimum leakage," he said.