RBI to balance growth, inflation: FM

Last Updated 31 October 2010, 16:11 IST

“The RBI is trying to find a balance between the need of growth and the need to contain inflation,” Mukherjee told reporters after laying the foundation stone of IFCI-promoted Management Development Institute’s new campus here.

However, he refused to give any guidance on the steps likely to be taken by the central bank at its November 2 monetary policy review. “We have to wait till monetary review by RBI,” he said.

Lending rates

The RBI is expected to increase short-time lending and borrowing rates by 25 basis points each at the forthcoming quarterly monetary policy review. The economy is giving conflicting signals, with inflation still at high levels, whereas core sector growth has slowed down considerably.

Despite moderation, the high levels of inflation have emerged as a major political issue. Overall inflation was 8.6 per cent in September. However,for the week ended October 16, food inflation stood at a high 13.75 per cent, even though this was down 1.78 percentage points vis-a-vis the previous week on the back of improved food supplies.

The Finance Minister said that prices of certain items generally go up in the rainy season, but admitted that this time around, the upward spiral had persisted for a longer duration than usual.

“Inflation is no doubt a concern, but last month we’ve seen a silver lining when after about 11 months of double digit inflation, the wholesale price index as well as all three consumer indices fell to single digit. The monetary policy being pursued by the Reserve Bank of India has taken due note of the situation,” Mukherjee said.

Mukherjee, however, stressed that  the recent instance of easing of food inflation has to continue for some more time before it can have any impacy of policy stances, and added that the inflation numbers have started coming down and all three consumer price indexes and wholesale price-based inflation numbers were in single digits for the first time in sixteen months.

Natural shortage

 “There is a natural shortage of fruits, vegetable and meat and milk during the rainy season but this time it has continued for a longer period. On top of this, there had been shortage of pulses and edible oil for which we had opened the import door,” he said. He asked states to revamp the public distribution system (PDS) to protect the poor from inflation.

He said the government programme for providing subsidised rice and wheat to 6.5 crore below poverty line families, including 2.5 crore Antyodaya Anna Yojana cardholders, can be successfully implented only if the PDS is revamped.

(Published 31 October 2010, 12:49 IST)

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