New Delhi: Exuding confidence that the RBI's monetary policy will lead to moderation in inflation numbers in the coming months, Finance Minister Pranab Mukherjee noted that inflation was likely to fall next year.

"But it (inflation) clearly remains a concern... But I expect the policy taken by RBI to further moderate inflation in coming months... Average inflation to be lower next year," Mukherjee said while presenting the Budget for 2011-12.

He, however, said that inflation, specially high food prices, continue to worry and also called for improvement of distribution and marketing systems to bridge the gap between
wholesale and retail prices.

"... Difference in wholesale and retail prices is not acceptable," Mukherjee said.

Regarding food inflation, he said: "The total food inflation declined from 20.4 per cent in February, 2010, to less than half, at 9.3 per cent in January, 2011."

Mukherjee also put emphasis on increasing agricultural productivity to curb food inflation.

The government and the RBI have been under pressure due to inflationary pressure, particularly of food products.

The RBI has hiked short-term lending and borrowing rates six times during the current fiscal, including a hike of 25 basis points in its third quarterly review in January.

The government had earlier said it expects inflation to fall to around 7 per cent by March-end and dip to around 5-6 per cent by the middle of the year.

However, the Economic Survey released last week said the high growth rate would also affect inflation, which would be 1.5 per cent more than what it would have been otherwise.

The Survey had also said that high global commodity prices, particularly crude prices, are going to be affected due to the turmoil in the Middle East and this may affect the domestic trend also.

Skyrocketing prices of vegetables found in every Indian's kitchen, particularly onions, even forced the government to go for an export ban for some period earlier in the fiscal. JPN/Agencies