Bangalore, July 30 (IANS) India's inflation rate, which peaked this month following the fuel price hike in June, will keep declining after July and moderate by December, Planning Commission Deputy Chairman Montek Singh Ahluwallia said Friday.

"It is true the core inflation rate had seen the full impact of the fuel price hike early this month. You will see the full effect of it (fuel price hike) now but inflation will definitely keep coming down after July," Ahluwallia told reporters on the margins of an interactive session with members of the Bangalore Chamber of Industry & Commerce (BCIC) here. 

Allaying fears that the fuel price hike would lead to an increase in the inflation rate, the deputy chairman said such a description would be incorrect as the government was not running a hidden deficit. 

"I don't think the fuel price hike will make any difference to inflation by December. Though I am not making a prediction, I am saying it (inflation) is going to be down by this year-end," Ahluwallia reiterated. 

For the first time this year, food inflation, as measured by the wholesale price index (WPI), eased to 9.67 percent for the week ended July 17, from 12.47 percent a week earlier and 15.05 percent in the like period a year ago. 

Food inflation remained above the 16 percent level for the most part of last year before falling to below 13 percent since mid-June, according to the official data released Thursday. 

The fuel prices index, however, rose to 14.29 percent due to the impact of the June 25 fuel price hike. The primary articles index rose at a slower pace to 14.5 percent. 

Commenting on the monetary measures of the the Reserve Bank of India (RBI) to contain inflation, Ahluwallia said the central bank had given the right signal that it was not going to let inflation go untouched. 

"The signal is very clear that the central bank is worried about the inflation rate," he added. 

India to set up $10-bn infrastructure debt fund 

Bangalore, July 30 (IANS) India plans to set up a $10-billion infrastructure debt fund for long-term financing infrastructure projects across the country, Planning Commission deputy chairman Montek Singh Ahluwalia said late Friday.

"The proposal is to initially have a $10 billion infrastructure debt fund. Though it may not solve the financing problem, it is going to demonstrate that such funds can work in India so that many more such funds can be set up for many infrastructure projects," Ahluwalia told IANS on the margins of an interactive session here.

The UPA government had recently set up a 15-member committee under the chairmanship of former HDFC chairman Deepak Parekh to work out the modalities of the proposed India Infrastructure Debt Fund (IIDF).

The committee has come out June 1 with a report on creation of a debt fund through low-cost long-term resources for re-financing infrastructure projects under the public-private partnership (PPP).

"The finance minister has asked me to talk to different stakeholders and make specific recommendations on whether the Parekh committee report is practical and what modifications in the regulatory system will be necessary, as such a fund does require some relaxations by the Reserve Bank of India (RBI) and the Securities Exchange Board of India (SEBI)," Ahluwallia said.

Noting that scaling the infrastructure was a major challenge facing the country, the deputy chairman said the plan panel had recently made sweeping recommendations after a mid-term assessment of the various infrastructure projects, their funding and regulatory issues governing their execution.

"For instance, if you are going to raise funds abroad, it may be used to refinance short-term loans. Until recently, you could not borrow abroad to refinance. You could borrow for original investment. For funding infrastructure projects, the norms have to be relaxed to raise debt funds," Ahluwallia pointed out.

Earlier, addressing members of the Bangalore Chamber of Industry & Commerce (BCIC), Ahluwallia said the private sector would have to scale its contribution to $500 billion during the 12th plan (2012-2017) for funding infrastructure projects under PPP from $175 billion in the 11th plan (2007-12).

Admitting that infrastructure deficit was a major constraint in achieving over nine percent gross domestic product (GDP) growth rate annually, Ahluwallia said the government and the private sector had to do much more in the next five years than they have done in the last five years in terms of scale.