Chairman of Prime Minister's economic Advisory Council C Rangarajan on Thursday said the rate of price rise would moderate in the coming months on the back of good monsoon and increased availability of foodgrains. He was addressing the Economic Editors' conference in New Delhi. Mr. Rangarajan said that high growth rate does not mean high inflation. He said all policy instruments should be used to re-anchor inflation expectations.

As regards fiscal deficit, Mr. Rangarajan said, it would be a Herculean task for the government to retain it at 4.6 per cent of the GDP estimated at the time of presentation of Budget for 2011-12. He, however, exuded confidence that the current fiscal deficit is still within manageable limits.

He said that there is no problem in managing the deficit as there was sufficient capital inflow to cover current account deficit which is 4.6 percent.

In reply to a query on the growth prospects of the economy, the PMEAC chief said that it would be 8 per cent during the current fiscal, marginally down from its earlier estimate of 8.2 per cent.

He said, the PMEAC had projected a growth rate of 8.2 per cent in July but there are many factors which will require to adjust it downwards. He said, the agricultural growth would be stronger than what was anticipated.

Mr. Rangarajan said, the industrial growth rate will be lower, while the services sector growth rate will remain more or less the same.

Mr. Rangarajan said that economy must grow to enable rising of living standards of people. He said that if the economy keeps growing at the rate of 8 to 9 percent by 2025, the per capita income of people will rise to two thousand dollars from the present 1600 dollars. Without growth no employment could be provided.

He said that the development must be inclusive, help reduce poverty and environment friendly. He asserted that equity and growth must be weaved together to produce a coherent pattern of development.

In reply to a query on Subsidy on diesel, Mr. Rangarajan advocated containing of subsidy and allowing the oil marketing companies to mitigate huge under-recoveries on diesel. He said that there needs to be a policy decision and it will be too late to allow these companies to raise the prices after inflation comes down.

He said the companies may be allowed to raise the prices as soon as headline inflation begins coming down.