Finance Minister P Chidambaram on Friday said that containing inflation was the government's "most immediate goal" and cautioned that some sectors of the economy were showing "signals of overheating".
"Our most immediate goal is keeping inflation moderate at around 4 per cent through a mix of fiscal and monetary steps," he said at a bankers' conference.
Inflation, which has risen to a four-month high of 5.41 per cent for the week ending October 21, was largely on account of rise in prices of primary articles, he said.
The minister, however, said he expected the economy to grow at eight per cent for the fourth year in a row.
The RBI's repo rate hike early this week was a signal that the central bank was ready to take monetary steps to check inflation. The government would simultaneously take the necessary fiscal measures to achieve the objective, he said.
The government "stumbled" last year in the supply-side management of food grains, especially wheat, forcing imports, he said, but added that lessons have been learned this year.
The other worrying cause was that there were "some signals of overheating" in certain sectors, he cautioned.
"Some sectors such as housing and credit cards are witnessing very high credit growth," he said, adding the banking sector must moderate their lending to such sectors and re-balance their portfolio.