New Delhi, Aug 15 (IANS): Prime Minister Narendra Modi on Monday said the government had brought down the annual inflation rate to below 6 per cent and was now working with the Reserve Bank of India (RBI) to bring it to 4 per cent, the plus-minus 2 percentage points range.

Backing the 4 per cent inflation target for the next five years till 2021, Modi in his Independence Day speech from the Red Fort said, "We are now working with the RBI to bring inflation to the 4 per cent, plus-minus 2 per cent range. We are rising above the discussion of inflation versus growth and are working to ensure that prices do not rise above a certain level."

The inflation target was notified by the government on August 5 under the monetary policy framework agreement with the RBI, signed in early 2015 to ensure macro-economic stability.

The central government in consultation with the RBI will henceforth determine the inflation target in terms of the Consumer Price Index (CPI) inflation or retail inflation, once in every five years. 

"The fact that despite two consecutive drought years, inflation has remained below 6 per cent and agricultural output has been stable, is a testimony to our nation's resilience, and to how far we have progressed since Independence,” Modi said.

"Our government faced a lot of challenges in terms of price rise due to two successive years of drought.”

Under the previous government, the inflation level had crossed the 10 per cent mark, but we did not let it rise above 6 per cent, Modi added.

“I will continue to strive hard to ensure that the this inflation doesn't affect the food plate of poor,” he said. 

India's annual retail inflation, however, shot up beyond the official tolerance level of 6 per cent for July, mainly on higher food prices like pulses and vegetables. The retail inflation, based on the Consumer Price Index (CPI) of the Central Statistics Office (CSO), rose to its highest level in 23 months from 5.77 per cent in June.

The annual retail inflation for rural India was 6.66 per cent, while that for the urban centres was 5.39 per cent for July.

Retail inflation is, however, expected to come down in the second half of the current fiscal despite the appointment of a new RBI Governor and the formation of the monetary policy committee, which is likely to create space for monetary easing by 25 basis points, Aditi Nayar, senior economist at domestic rating agency ICRA, said.