Mumbai: A fall in vegetable prices is likely to ease headline inflation and retail inflation to 6.5 percent and 9.20 percent respectively in December, Prime Minister's Economic Advisory Council (PMEAC) Chairman C Rangarajan said on Saturday.
"Some of the things that have really pushed up inflation are vegetables like onion prices, which have crashed in December. Therefore when December number comes in mid January, we will see retail inflation coming down by 2-2.5 percentage from the current level of 11 percent or so. There could be a decline in wholesale price index ... Could be the order of 1 percentage," Rangarajan told reporters on the sidelines of the silver jubilee celebration of Indira Gandhi Institute of Development Research.
Wholesale price-based inflation (WPI) accelerated to 14- month high of 7.52 percent in November, while retail inflation quickened to eight-month high of 11.24 percent during the month.
Going forward, Rangarajan said, the declining trend in inflation will continue and WPI may ease to 6.5 percent by March-end.
"The RBI has estimated WPI to be around 6.5 percent by March end. That is the number we are looking at. We will see a decline in December and perhaps it will continue," he said.
Quoting an econometric study, the former RBI governor said the threshold inflation level is around six percent, but there is a need to look at the slightly lower as the level is much higher than what many other countries in the world... advanced countries treat as the acceptable level of inflation.
