Diesel price hike will fuel inflation: Rangarajan

Any increase in the price of diesel will fuel inflation, the chairman of the prime minister's economic advisory council (EAC), C Rangarajan, said in Chandigarh on Monday.

Inflation, he said, could only be checked to an extent through imports. ''The possibility of augmenting supply and cutting down inflation through imports is limited ... if diesel and LPG prices are increased in the near future, certainly it will further augment inflation affecting commodity prices,'' Dr Rangarajan, said.

Rangarajan was in the city to inaugurate the 93rd annual conference of the Indian Economic Association (IEA) at Panjab University. Among the delegates was Sukhdeo Thorat, chairman of the University Grants Commission (UGC) and director of IEA.

Food prices, Rangarajan said, normally came down with the onset of winter, but factors like a delayed monsoon and floods have ensured this year has been different.

''What stands out in food inflation is cereals, as their prices have not shown any increase. Rather, prices of cereals have come down in recent months,'' he said.

Rangarajan said inflation is expected to come down to 5.5 per cent by March 2011. Besides, the EAC sees a GDP growth rate between 8.5 and 9 per cent in the current fiscal.