India's inflation to continue falling; may stay at 5%-6% next fiscal: PM's econ advisor Rangarajan

New Delhi: India's annual headline inflation is expected to continue its downward trend seen since November and remain at around 5%-6% in the next financial year 2012-13 due to the tight monetary policy followed by the central bank, Prime Minister's Economic Advisory Council Chairman C Rangarajan said Wednesday.

“Headline inflation has shown decline since November 2011 and more strongly in January 2012... both monetary and other public policies seem to have had the desired effect,” Rangarajan said at the release of the council's report 'Review of the Economy 2011-12’.

At the end of March 2012, headline inflation is projected to be around 6.5%, he said.

The wholesale price index (WPI) based inflation eased to a 26-month low of 6.55% in January from the 7.47% yearly rise recorded in December, primarily due to significant fall in food prices.

Earlier, the Reserve Bank of India (RBI) had raised key interest rate, or repo rate by 375 basis points in 13 sequential steps since March 2010 to tame stubbornly high inflation until it pressed the pause button on rate hikes in its December 16 mid-quarterly monetary policy review to address concerns about deteriorating economic growth.

Further, in January, the RBI cut cash reserve ratio (CRR) -- the portion of deposits that banks are required to keep with RBI -- from 6% to 5.5% and tilted its policy focus more towards supporting the country's growth by trying to boost investment activity.