New Delhi, Mar 15: Rising inflation in India is the direct outcome of an abnormal hike in the global prices of commodities and attempts are being made to control domestic price-rice through monetary and fiscal measures, Finance Minister P Chidambram told the Lok Sabha on March 14. The rising inflation is a matter of worry for the government which has also led to price rise in essential commodities, he added.
However, the inflation rate which rose to 6.4 percent in January-March last year has come down to 4.3 per cent in Jan-February this year. Explaining the domestic price rise, the Finance Minister said the crude oil prices which were at 37 US dollars per barrel in 2004 rose to 60 dollars in 2005, again to 90 dollars the next year and ended at 110 dollars per barrel now. Similarly, the rates of palm-oil, another commodity which India is importing, had risen from 410 US dollars a tonne in 2004 to 710 dollar in 2005, then touched 1077 dollars the next year and now reached 1177 dollars a tonne.
On the same pattern, the global wheat prices underwent a phenomenal rise in the past three years. The same is the story of rice whose global prices rose from 225 US dollars a tonne in 2004 to 296 dollars in 2005, then 364 dollars the next year and now at 510 dollars per tonne. Besides the food items, prices of minerals like zinc, tin, steel, magazines and others also witnessed unprecedented hike impacting the domestic prices.
Mr Chidambaram said some states were demanding more royalty on the minerals, which, in turn, would further lead to rise in prices. In his detailed reply during the Question Hour, the Finance Minister said ''Now, we have hiked the Minimum Support Price(MSP) of wheat to Rs 1000 a quintal and the government is under pressure to enhance the MSP of paddy, too, to Rs 1000 a quintal. Rice in MSP of foodgrains is bound to be reflected in the domestic prices.
In this context, fiscal and monetary measures usually fall short of providing an effective remedy against the price-rise, he said adding in such case the only option left was to achieve 'self-suffiency' in the foodgrains production, particularly in the case of edible oils and pulses which were being improted on a large scale.
''Importing food items always mean importing the price-rise and inflation in the country,"the Minister said adding that now the government had taken special steps to enhance the domestic production of foodgrains, edible oils and pulses.
Counting the anti-inflationary steps taken by the government, Mr Chidambaram said these measures included fiscal discipline, rationalization of duties on essentail items, effective supply-demand management of essentail commodities through liberal tariff and trade policies and strengthening the Public Distribution System. The policies of the Reserve Bank of India and of the Government complement each other.