RBI moves pull down inflation;supply pressures exist: FM | india | Hindustan Times
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RBI moves pull down inflation;supply pressures exist: FM

A cautious government on Monday said RBI monetary actions have helped bring down inflation to 9-month low of 8.58%, though supply shortages are exerting pressure on prices.

india Updated: Nov 15, 2010 15:55 IST

A cautious government on Monday said RBI monetary actions have helped bring down inflation to 9-month low of 8.58%, though supply shortages are exerting pressure on prices.

The Planning Commission panel has said that food prices are still high even as inflation is declining slowly.

"From April 2009 to September 16, 2010, we have increased cash reserve ratio (CRR) by one percentage point. We have increased repo (short term lending) rate by 1.5%", Finance Minister Pranab Mukherjee said.

He said the reverse repo (short term borrowing) rate has also been increased by 1.75% and "that has some effects,"

The Finance Minister, however, said inflationary pressure is coming from supply side as well.

RBI monetary actions do not have any role in augmenting supply of goods and they basically alter demand to control inflation.

While overall inflation declined to nine-month low, food inflation remained at an elevated level of 14.13% in October, despite moderation from 15.71% in September.

The Finance Minister refused to specify any further actions that might be taken to control inflation and said that global situation also impacts prices.

"I will not make any pre-judgement on what action will be taken. International situation has its own impact," he said.

Analysts said that low wheat production in central Asia and rising global commodity prices may again pressure inflation.

Meanwhile, Planning Commission deputy chairman Montek Singh Ahluwalia said,"Inflation has declined but food inflation is high. Further decline is necessary..inflation is coming down slowly".

Manufactured items inflation rose to 4.75% in October from 4.59% in October.

"It is true that manufacturing inflation has gone up. I am not surprised, if (overall) inflation is heading towards a six per cent level", Ahluwalia told reporters.

"The food inflation would sharply decline and inflation in manufacturing sector would rise to average level (5%)", Ahluwalia said.

"The important thing is that food inflation should come down. I hope that it will happen in coming months," he said.

About sticking to his earlier projection of inflation coming down to 6% by December end, he said "it will".