It is very important to tame inflation to 5 per cent in the medium term, according to Dr C. Rangarajan, Chairman, Economic Advisory Council to the Prime Minister.
Speaking on the current economy and policy options at the College of Defence Management here on Monday, he said: “We need to use all policy instruments to achieve this.”
Along with measures to increase supply of essential items, the monetary and fiscal policies had to be tightened, the noted economist said.
The food inflation was expected to come down in the coming months due to monsoon.
From 7.7 per cent now, it might come down to 6.5 per cent by March 2012, he said.
The economy has a potential to grow in the range of 9-9.5 per cent, he added.