Washington: Amidst all-out efforts by the government and RBI to tame inflation, now hovering around 9 percent, Finance Minister Pranab Mukherjee on Tuesday said it would be ideal for the economy if it is managed at 5-6 per cent level.

"To be very frank, what shall be acceptable and what can be a tolerable level of inflation is very difficult to define. But in our economy, we feel that if we can keep inflationary pressure within 5-6 per cent, it could be ideal, but we can live with 6 to 6.5 per cent," Mukherjee said while addressing business delegates from India and the US here.

He added this year inflation will be a little more.

Overall inflation climbed to 9.06 per cent in May from 8.66 per cent in the previous month, fanning fears that high rate of price rise could hurt the economic growth.

Mukherjee said the current inflation level was due to high global commodity prices.

"(inflation is) Not because of near supply constraints on the agricultural front ... But the international commodity prices, including food and fuel, is causing severe constraints," he said.

Mukherjee said food prices have started coming down and the government has also tried to cushion the impact of rising crude prices by sacrificing central taxes. Besides, state governments too have been asked to reduce their taxes on fuel.

"I do have hope that it will have some impact. But this (inflation) is going to be a major problem and it would have its impact on the overall growth scenario," he said.

"There are problems (with the Indian economy) and one of the major problems is inflation," Mukherjee, who arrived in Washington on Monday leading a high-powered Indian delegation
for the second India-US Economic and Financial Partnership discussions being held here, said.

With an eye on taming headline inflation (hovering around 9 per cent now), RBI raised key rates a record 10 times since March 2010, the last being a 25 bps hike on June 16.

RBI's hard interest rate regime had seen industrial production growing by 6.3 per cent in April 2011 against over 16 per cent growth in the year-ago period, prompting analysts to say that probably economy is slowing down.

Agencies