"In case of onion and vegetables, it is the supply factor which has been responsible for the push-up in prices. We need to take action on the supply side, increase availability and see that market mechanisms are improved and availability or existing supply is evenly distributed to consumers," he said.
Rangarajan, who was answering questions on onion prices touching Rs 100 per kg in some cities, said the impact on inflation would not last long.
"It may not have a permanent effect. It may have a temporary effect on inflation," the Chairman of the Prime Minister's Economic Advisory Council (PMEAC) said.
Inflation as measured by the wholesale price index rose to a seven-month high of 6.46 per cent in September. Food inflation was at 18.40 per cent, led by spiralling onion prices.
Inflation in onions skyrocketed 323 per cent in September.
Rangarajan said: "There can always be a temporary increase in inflation. But once the availability increases, it is expected that supply will get augmented in coming weeks and then it will come down."
Agriculture Minister Sharad Pawar said there is a "temporary" shortage of onions and prices are expected to fall in the next 2-3 weeks.
Echoing similar views, Commerce Minister Anand Sharma said there is no scarcity of onions in the country and prices are expected to stabilise in the coming few weeks.