Prime Minister, Dr Manmohan Singh, on Saturday said a good monsoon this year will help overall inflation ease to 6 per cent by the year-end, a figure more optimistic than the ones projected by his advisory council earlier.
He also said that as per the mid-term review of the 11th Five Year Plan (2007-12), the country was falling short of the plan target.
"We expect to see the rate of inflation in wholesale prices come down to around six percent by December," said Dr Manmohan Singh while addressing a meeting of the National Development Council (NDC), the country's top policy forum.
"The present high rate of inflation is mainly due to food price inflation. With a normal monsoon, which is the expectation at present, the rate of inflation in food prices will abate in the second half of the year," he added.
The Prime Minister's Economic Advisory Council had on Friday predicted headline inflation to be around 7-8 per cent by Decemeber from the 10.55 per cent level seen in June.
With inflation becoming more broad based, the opposition parties will try to corner the government when the Lok Sabha monsoon session starts August 17.
The NDC meeting which is being attended by all chief ministers, members of the Planning Commission and key members of the central cabinet, will deliberate on five areas of concern: agricultural productivity, management of water resources, power generation targets, issues of urbanization and specific problems of tribal development.
Taking stock of the progress of the 11th Five Year Plan (2007-12), the Prime Minister said the country had fallen short on achieving various sectoral targets including infrastructure, agriculture and power generation.
"The mid-term appraisal projects the eleventh plan will achieve an annual average growth rate of 8.1 percent per year. This is lower than the target of 9 percent, but is still the highest ever achieved in any plan period," said Dr Manmohan Singh.
Agriculture may not reach the target of 4 percent by the end of the plan period in 2012, while and power generation capacity would fall short of the the target of 78,000 MW.
"The state of infrastructure in the country is not good enough to achieve 9-10 per cent growth over a sustained basis. We need to do much more in future," said the prime minister who is also chairman of the Planning Commission.
"Because the resources required for bridging the infrastructure gap are huge, we adopted the strategy of encouraging public-private partnership (PPP) in infrastructure. We need to improve the terms and conditions on which PPP projects are awarded to ensure that the process is transparent and bidding is competitive."