New Delhi: Indian Prime Minister Manmohan Singh yesterday reiterated his prediction headline inflation would ease to 6 per cent by December, a forecast more optimistic than that delivered by his economic advisers a day before.
The prime minister's Economic Advisory Council had said inflation would be at 7-8 per cent by year-end, compared with 10.55 per cent in June, and its chairman recommended strong monetary action to tame runaway prices.
Singh's statement comes amid a growing divergence between the government and the central bank on the need for monetary tightening to cool inflation that has been in double digits for five straight months.
New Delhi puts high food prices as the cause and argues normal monsoon rains would cool inflation, while the Reserve Bank of India (RBI) says demand-side factors will continue to keep up pressure on inflation.
Saturday, Singh backed his officials' view.
"The present high rate of inflation is mainly due to food price inflation," he told a conference of top federal and state policymakers gathered to assess the country's development plans.
"The government has taken a number of steps to curb inflation. With a normal monsoon, which is the expectation at present, the rate of inflation will abate in the second half of the year."
The RBI is widely expected to raise rates by 25 basis points for the fourth time since March when it reviews policy on Tuesday and many observers see the main lending rate rising to 6-6.25 per cent by end-December from 5.50 per cent.
Singh also called for cutting subsidies and reducing losses at state-run firms to shore up public finances needed for development.
