Inflation must come down to 5% or below for stabilizing economy, RBI

Inflation must come down to 5% or below for stabilizing economy, RBIIndian central bank, the Reserve Bank of India’s (RBI) Governor, D Subbarao has said that the inflation in the country should fall to five percent or below that level in order to bring stabilization in the economy and facilitate economic growth.

D Subbarao said, "A high-inflation scenario makes both savers and investors uncertain." He said that the monetary tightening policy by the RBI is aimed at restraining demand and anchoring inflation expectations.

India’s headline inflation, which is measured by the wholesale price index, has remained around the level of 9 per cent recently and the RBI has raised its key interest rates 13 times since March of 2010 to control the inflation.

The central bank is expecting the inflation in the country to ease in the December-January period and fall below 7 per cent in March. D Subbarao said that it was important to reduce government's high fiscal deficit to stabilize growth to sustainable levels. The government has estimated that fiscal deficit at 4.6 per cent of the gross domestic product (GDP) in the current financial year.

Subbarao also said that infrastructure deficit was affecting faster economic growth and more steps are needed to control deficit. He also outlined the need to enhance agricultural productivity to boost growth.