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'Inflation at 'more acceptable' level in 6-12 months'

Finance minister Pranab Mukherjee said today inflation would come down to 6-7% by the end of the current fiscal as the government has taken a number of measures to address the issue of demand-supply mismatch, the main reason behind price rise. Rupee at historic low of Rs 52.73/dollar | Inflation hurting govt's credibility: Montek

business Updated: Nov 22, 2011 20:53 IST

Finance minister Pranab Mukherjee said on Tuesday inflation would come down to 6-7% by the end of the current fiscal and to a "more acceptable" level in the next 6 to 12 months as the government has taken a number of fiscal and monetary measures to address the issue of demand-supply mismatch, the main reason behind general price rise.

"Government is committed to bring down inflation to more acceptable levels. I hope to see the March-end inflation between 6 to 7%," Mukherjee said.

Making a suo-motu statement on inflation in Lok Sabha, Mukherjee claimed there has been a steady improvement in the situation and the policy initiatives would help "bring down the inflation rate to more acceptable levels in the next 6 to 12 months."

Overall inflation has remained stubbornly high, near double digits, since January 2010. Headline inflation based on the wholesale price index was recorded at 9.73% in October. Food inflation was recorded at 10.63% for the week ended Nov 5, according to the latest official data.

Inflation rate in the range of 4-5% is considered a comfortable level for the developing economies like India.

The finance minister said inflation has remained stubbornly high, almost double the comfortable level, for the last two years due to a combination of domestic and global factors.

Mukherjee said macroeconomic policies, especially the fiscal stimulus, by the developed countries in the post-global financial crisis have created the problems of inflation management in the developing countries.

The finance minister said sustained high economic growth in recent past has led to improvements in purchasing power in both rural and urban areas leading to demand-supply mismatch.

He pointed out that crude oil and other commodity prices have remained high despite a slowdown in the global economy.

"Despite weak prognosis of global growth and trade in the short to medium term, international commodity prices have not softened at the anticipated pace. For example, crude oil was around $75 a barrel in January 2010, but on an average continues to be around $110 in the current year," he said.

"Speculative activity in commodity markets and some supply disruptions in fuel oil, like in Libya, have kept the commodity markets tight," he added.