Inflation may ease to 6.5 pct in December: C. Rangarajan

Dec 22 2013, 20:37 IST
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C Rangarajan C Rangarajan
Summary'The RBI has estimated WPI to be around 6.5 per cent by March end.'

in the short run, a return to higher level of savings and investment can take us back to the very high levels of growth which we had seen earlier," Rangarajan said.

He said according to several studies, the current account deficit level of 2.5 per cent of the gross domestic product (GDP) is the only sustainable level of CAD, taking into account the normal capital flows.

"In fact, even a somewhat lower level of CAD will be desirable," he noted.

Talking about the potential growth rate of 8.5 per cent, Rangarajan said it could be achieved with some pick up in domestic savings rate, narrow current account deficit and sustained level of capital output ratio at around 4:1.

"With modest current account deficit of 2.5 per cent of GDP and a savings rate of 32 per cent of GDP, one can expect the Indian economy to grow at 8.5 per cent," Rangarajan said.

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