Inflation above comfort level, govt concerned: Pranab

Pranab Mukherjee
New Delhi, Dec 20: The government today (Dec 20) said inflation, which is above comfort level, is a matter of concern and steps are being taken to address the price situation.

"...inflation has been above comfort level and is a matter of concern," Finance Minister Pranab Mukherjee told the Rajya Sabha in a written reply.

He, however, expressed satisfaction that inflation has started to decline.

The headline inflation declined to 9.11% in November against 9.73% in the previous month. Similarly, food inflation eased to a nearly four-year low of 4.35% for the week ended December 3.

Mukherjee said both the government and Reserve Bank were taking steps to contain inflation.

Steps taken by government include, reducing import duties on pulses and edible oil to zero and banning export of certain edible oil and pulses. Besides, the government has reduced customs duty on crude oil.

The RBI on its part has adopted a tight monetary policy since March 2010 in its bid to tame inflation.

When asked if increasing interest rates was the only option in the monetary policy to contain inflation, Mukherjee said RBI has multiple monetary policy instruments at its command. However the use of each instrument is situation specific.

Mukherjee further said high inflation and some of the efforts to control liquidity "has detrimental" effect on growth in the short term.

Since March 2010, the RBI has cumulatively raised the cash reserve ratio (CRR) by 100 basis points, and hiked the policy rate (repo rate) 13 times by 375 basis points.

However, in its latest mid-quarter review, the RBI refrained from raising interest rates.


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