‘World prices,not rupee to hit inflation’

Global commodity prices will have a larger impact on India,Rangarajan said.

Prime Minister’s advisory panel chief C Rangarajan today said movement in global commodity prices,and not the declining value of rupee against dollar,will have bigger implications for the inflation,which is hovering near double-digit for the last 28 months.

“The depreciation of the rupee has an impact on the imports,obviously the imported commodities such as oil in rupee term will cost more. But the ultimate impact to the economy will also depend on what happens to the dollar price of these commodities,” he said on the sidelines of the Foundation day fete of the Institute for Development and Research in Banking Technology here.

The Chairman of the Prime Minister’s Economic Advisory Council (PMEAC) said the global commodity prices will have a larger impact on India,which imports about 80 per cent of its crude oil requirement. A weak Indian currency means paying more rupees against every dollar of imports.

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“There is a possibility that if the world economy does not grow strongly,perhaps the international commodity prices will also come down,” Rangarajan said.

The rupee touched a historic low of 52.73 this month against the dollar. However,it has recovered since and was quoting 35 paise up against dollar in early trade today at 51.90.

The growth in the US economy is yet to pick up pace and several euro-zone nations are facing sovereign debt crisis.

Rangarajan further said that the recent moderation in food inflation,which fell to a four-month low of 9.01 per cent for the week ending November 12,is on account of the good monsoon and exuded optimism that the rate of price rise will fall further over next three months.

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He also said that headline inflation will moderate to around 7 per cent by March 2012. Headline inflation has been above the 9 per cent since December last year and stood at 9.73 per cent in October this year.

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