With the inflation rate going beyond 6 per cent, Prime Minister Manmohan Singh on Saturday said the government would make appropriate policy interventions to contain the rising price line. Singh, who met his economic advisory council (EAC) headed by former Reserve Bank of India governor C. Rangarajan, said the government was “committed” to reducing inflation by taking appropriate policy measures.
The inflation rate reached 6.11 per cent for the week ending January 20, primarily due to higher prices of food products like pulses, fruits, vegetables and eggs. After reaching a two-year high of 6.12 per cent a fortnight ago, wholesale price index-based inflation had marginally come down to 5.95 per cent the previous week.
Last week, the government reduced customs duty on a host of items including cement, steel, aluminium, inorganic chemicals and edible oils “as part of its strategy to keep the prices of essential commodities under check”. Besides, the RBI’s decision to tighten liquidity by hiking the repo rate by 0.25 per cent is also expected to temper down inflation in the coming weeks, officials said.
The index of food articles rose by 0.4 per cent to 214.6 due to higher prices of eggs, condiments and spices (4 per cent each), and pulses like arhar (2 per cent), moong and masur (1 per cent). Fruit, vegetable, maize and fish prices also went up one per cent.
Rangarajan said inflation was a key macro-economic challenge in the short term and hoped the steps taken by the government and RBI would be able to dampen inflationary expectations. “While global factors and rising demand have contributed to inflation in some sectors, supply constraints have contributed to a large extent. Easing of these constraints through appropriate interventions will ease the price pressure,” he said.
Presenting an optimistic assessment of the economy, the EAC told Singh per capita income growth would, for the first time in 15 years, be more than 7 per cent in 2006 and 2007.