New Delhi (Agencies): Amidst the apprehensions of ‘temporary increase’ in fuel prices following the Egypt crisis, Prime Minister's Economic Advisory Council Chairman C Rangarajan on Wednesday said RBI is expected to continue with tight monetary policy to tackle inflation.

"To the extent at which the entire Middle East is affected, it could result in temporary increase in oil prices," Rangarajan told reporters here.

There have been concerns over disruption in crude oil supplies through the Suez Canal--one of the world's most important commercial waterways as a fallout of protests in Egypt against President Hosni Mubarak.

Instability in Egypt has already taken international crude prices to a 28-month high of over USD 102 per barrel.


"RBI's primary concern will be inflation. So long as inflation continues to remain at an uncomfortably high level, perhaps RBI will continue to follow its policy of tightening,” said the former RBI Governor.

He said inflation is expected to be 7 per cent by March-end, in line with projections made by the RBI at its third quarterly review last month.

The general inflation in December was 8.43 per cent while food inflation was above 17 per cent for the week ended January 22.

In order to tighten supply of liquidity in the system during last month's review, there was a hike in short-term lending and borrowing rates by 25 basis points by RBI last month.
 
Rangarajan said the economic growth during the second half would be lower than 8.9 per cent increase witnessed in the April-September period.

The advance estimates of economic growth released earlier this week had projected a growth of 8.6 per cent during this fiscal, on the back of a big upswing in agriculture output.

The PMEAC chief added that the fiscal deficit during 2010-11 could be lower than 5.5 per cent pegged by the government for 2010-11.

"Fiscal deficit may be somewhat lower than what was originally budgeted because revenue has been good," Rangarajan said.