Expect food inflation to ease going ahead: Rangarajan

Q: What is your sense? Governor had not hiked rates, but has put the economy on notice with a very strong statement that if food inflation does not fall in the next reading then he will act. What is your sense - good action or behind the curve?

A: It is a difficult balancing act. The wholesale price and the Consumer Price Index (CPI) inflation have shown a rise, but that is largely due to rise in vegetable prices. Therefore it has decided to wait and see what happens to these prices because there are already indications that vegetable prices will come down. Probably when December numbers are released, they will clearly indicate a decline in the prices. There is also a message in the statement that if prices don’t behave as expected then further action or separate action maybe taken by the Reserve Bank of India (RBI).

Q: Don't you think it’s a costly wait?

A: I do not think so. I certainly think that the December prices will be in the downward direction. Vegetable prices have come down very sharply, not by a small margin, but by a big margin. Therefore December numbers will show a decline when it is released sometime in the middle of January.  I certainly think that the priority to the RBI is price stability and therefore they should keep continuous watch on inflation.