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Inflationary expectations to be 6-7%: Pranab

Finance Minister Pranab Mukherjee today said that inflationary expectations would be in the six to seven % range.

business Updated: Mar 31, 2012 17:45 IST

Finance Minister Pranab Mukherjee on Saturday said that inflationary expectations would be in the six to seven % range.


"My inflationary expectations will be between six and seven % and not below that," Mukherjee said.

He said that if the inflationary expectations were below that, then it would lead to stagflation and growth would be hampered.

Mukherjee said that inflation had been moderated and would be taken into account during formulation of policy rates.

"I hope the RBI will keep this in view while making policy rates formulation," he noted.

He said that inflation had been perilously close to double-digit for nearly two years and food inflation was as high as 22 %.

"I had to take corrective measures as these high figures were not desirable," he said.

In February, inflation as measured on the Wholesale Price Index (WPI) rose to 6.95 %, against 6.55 % in the previous month.

Mukherjee said that the 2012-13 Budget was placed with a view of fiscal consolidation, moderation of inflation and bringing back India to a higher trajectory of sustainable growth.

Regarding improving private sector sentiments, he said that DTC would be introduced next year after examination of recommendations of the Parliamentary Standing Committee.

Mukherjee said that if fiscal consolidation was achieved, then the private sector's elbow room for borrowing would improve substantially.

The finance minister said that he had tried to mop up additional resources to give credibility to fiscal consolidation efforts and also to meet the objective of reaching Goods and Services Tax (GST).

The cardinal principle of GST was to bring in alignment of taxes for which the excise and services tax had been brought at par in the Budget for 2012-13.

He said that he was not able to make any dramatic announcement and decision in the Budget.

Stating that since 1989, the Indian electorate had been giving a fractured mandate with no party having clear majority, he said "You can have the power to rule, but you will have to take others together. So within these constraints, I had to formulate the proposals."

Regarding food and fertiliser subsidies, he said that in the Budget it was said that it would be selective.

"We have to provide food subsidy and in other areas. It will linked to the capacity of paying," he said.

"I have pegged the subsidy burden at two % of GDP," he said.

Mukherjee said that the last increase in oil prices was in June 2011.

"There has been no price escalation since then," he said.