Terming RBI’s decision of keeping policy rates unchanged as the “right move”, outgoing Chief Economic Advisor Kaushik Basu has expressed hope that headline inflation would fall below 7% in September.
“My expectation is that inflation in the month of September will go below 7%,” he said in his last media interaction with his term ending on Tuesday.
Headline or Wholesale Price Index-based inflation eased to a five-month low of 7.25% in June, much above the RBI’s comfort level of 5%. Besides, retail inflation too remains at an elevated level of 10.02%.
“RBI has said pause. RBI has made a right move and the lowering of SLR is a very important small move (will) give right indication,” Basu added.
On the economy’s growth prospects, he said that with the global economy going through difficult times, it is imminent that GDP would slow down in the first two quarters of the fiscal.
“In the first two quarters, growth will remain below 6%. Hopefully there will be a pick up after that,” Basu said, adding that the government needs to bring in fundamental changes and move forward to achieve high growth momentum.
Economic growth had slumped to a 29-quarter low of 5.3% in the January-March quarter of 2011-2 fiscal. With the upside risks to inflation, RBI has lowered the growth forecast for the current fiscal to 6.5% from 7.3% earlier. Basu said that there should be some easing of interest rates in the medium to long term.
Replying to questions on opening multi-brand retail to foreign investment and decontrol of diesel prices, Basu said the Inter-Ministerial Group has already submitted its report to the government but there is question of timing.