Prime MinisterÂ’s Economic Advisory Council Chairman C Rangarajan expressed hope that inflation would ease to six per cent by the end of the next financial year.
Although the increase in fuel prices and train fares could prevent headline inflation from moderating in the near term, in the long-run he expects inflation to trend down.
IndiaÂ’s wholesale price index-based inflation increased at its slowest pace in 10 months in November and rose 7.24 per cent from a year earlier.
Inflation may come down to about seven per cent by March under a normal situation. But the actions taken to correct the suppressed inflation may come in the way of headline inflation falling.
But in the medium term, it (fuel price and fare hikes) is the right kind of decision, Rangarajan said during his inaugural address in a conference organised by the Indian Institute of Foreign Trade.
In September 2012, the centre had capped the number of subsidised LPG cylinders and increased the diesel price by Rs 5 a litre.
Rangarajan said these steps were necessary for fiscal consolidation, though they might lead to a higher-than-expected inflation rate in the near term.
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