Giving reprieve to transporters and other users of the fuel, the government has said it was not the right time to deregulate diesel prices, as inflation continued to be high.

"I don't think it will be a wise or prudent thing to do (deregulate price of diesel) at a time when inflation is running so high," Finance Secretary Ashok Chawla said at a panel discussion on CNBC TV 18.

The government had in June deregulated the prices of petrol but did not take a decision on diesel, which is used by various industries and the transport sector.

Following deregulation, the price of petrol went up by Rs 3.50 a litre. Besides, it raised the prices of diesel by Rs 2 a litre but did not link it to market price. As regards the cooking fuel, the LPG became dearer by Rs 35 a cylinder and kerosene by Rs 3 a litre.

On inflation, Chawla said it is likely to fall to around 6 per cent within the next few months from the current level of 8.5 per cent. He added, "it's not the case that because you have high growth rate you must have high inflation."

For calculating inflation, from August, the government has come out with a new index, which revealed that the rate of price rise declined by 1.3 percentage points to a 7-month low of 8.5 per cent during that month.

However, data on the old inflation series, which was released along with the new series, showed that the rate of price rise dipped marginally from 10 per cent in July to 9.5 per cent in August.

Chawla said the Indian economy is likely to grow 8.5 per cent this fiscal and it could be little higher next fiscal.

"With the kind of growth that we are running, the kind of growth that we are seeing in the economy this year, its going to be 8.5 per cent, probably little bit more next year," he said.