The Reserve Bank of India will need to continue with its monetary tightening policy to bring inflation under control, said Dr C. Rangarajan, Chairman, Prime Minister's Economic Advisory Council.
“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,” Dr Rangarajan told reporters on the sidelines of the Skoch summit here on Friday.
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.
Dr Rangarajan also added that overall inflation is likely to fall to 7.5 per cent in March from 8.31 per cent in February, and in the next fiscal it could decline to 6 per cent.
Commenting on the Libyan crisis' effect on oil prices and the Indian economy, he said, “If crude oil prices remain at a high level, it could impact the Government's finances and price levels.”
Dr Rangarajan expects the Indian economy to grow by 8.6 per cent in the current fiscal and 9 per cent in the next. However, inflation and deficits are constraints to 9 per cent sustainable growth, he added.
“I do not subscribe to the view that high growth leads to high inflation,” he said.