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Govt admits achieving little success in curbing inflation

The Finance Ministry says that the measures to control inflation have resulted in limited success because of China and the buoyant credit demand in the Indian market.

business Updated: Apr 12, 2007 22:32 IST

The government on Thursday admitted that its fiscal and monetary measures to control inflation was having only limited success in controlling inflation. And, one of the reasons given was China’s growing market economy.

Recently, the Reserve Bank of India has increased interest rate on all loans as one of the measures to check inflation. But, the Finance Ministry told the Cabinet that the measures had resulted in limited success because of China and the buoyant credit demand in the Indian market. "The international prices of non-fuel commodities have maintained a steady pace due to increased demand of these goods from China," the Cabinet was told.

The government has blamed short-supply of wheat, pulses and edible oil as a primary reason for constant rise in inflation. Inflation rose to 6.4 per cent in March 2007, highest in last six years. During the period, the consumer price index for industrial workers rose to 7.56 per cent whereas for others, it rose to 9.80 per cent.

But, what pinched the common man, resulting them apparently going against the Congress in Delhi municipal polls and Punjab elections, was over 12 per cent increase in prices of primary articles (goods of daily use). A year ago the prices of primary articles has increased only by 3.69 per cent. "The huge variation indicates why the rising inflation has hit the common man the most and their anger against the government," a senior government official said.

This rise in the prices of primary articles contributed 40 per cent to the overall inflation figures. Whereas, the commonly blamed sector - increase in fuel prices - contributed only 3.7 per cent to the inflation figures. Another sector that had a major contribution to increase in inflation was the manufacturing sector with a share of over 55 per cent.

The government has also admitted that it was not able to maintain steady supply of pulses, wheat and edible oil resulting in its prices skyrocketing.

First Published: Apr 12, 2007 22:04 IST