Soaring crude will pull down growth by 50 basis points

The expectation now is that probably growth will be 8.5 per cent

The countrys chief statistician TCA Anant on Friday said that soaring crude prices will hit growth by as much as 0.5 per cent in 2011-12 but inflation may ease to below 8 per cent on the back of a good monsoon.

The expectation now is that probably growth will be 8.5 per cent. This is subject to the assumption on how effectively do we manage the oil price situation, Anant said on the sidelines of a seminar organised by Ficci.

Finance minister Pranab Mukherjee had pegged GDP growth at 9 per cent in 2011-12 but the RBI in its monetary policy review earlier this month had pared it down to about 8 per cent on concerns of high global crude oil prices that have been ranging at over 100 a barrel.

The countrys chief statistician also highlighted the threat from high crude prices in the wake of the current political turmoil in parts of the Middle East and North Africa,along with the recent tsunami and earthquake and subsequent radiation leakage that hit Japan.

Oil situation is a matter of worry and it is likely that oil prices internationally will harden significantly8230; Crude is also a major input. So it may be a factor which will dampen some of our growth expectations, he said.

The Middle East situation is an area of concern. It is likely that the fall-out of the events in Japan may temporarily raise demand for fossil fuel like oil and gas while they review their nuclear dependence8230; I suspect these factors will contribute to a certain measure of hardening of crude prices, Anant further said.

However,he was a little more optimistic on inflation and said that the rate of price rise of food items is showing a declining trend and headline inflation could ease below 8 per cent by August. My guess is that if all goes well and if by July it appears that monsoon is normal,I think8230; maybe by mid-year,either August or September,we should see inflation rates moderate. But I am putting a big assumption there, he said.

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Headline inflation in the country has been above the 8 per cent mark since January,2010. In April,overall inflation stood at 8.66 per cent,as against over 9 per cent in March.

In its annual policy,the Reserve Bank had said that while inflationary pressure from food items has been declining,concerns remain about high global commodity prices.

The central bank projected that inflation would average 9 per cent during the first half of the fiscal,before moderating to 6 per cent by year-end.