Ineffective delivery system cause of inflation: IMC

Mumbai, Mar 31: Indian Merchants' Chamber (IMC) has maintained that shortages of certain important commodities and ineffective delivery system are the basic cause of current phase of inflation spiral, more than excess money supply with the public.

''In view of this, the RBI decision to curb money supply by sharply hiking CRR by 50 bps to 6.50 per cent and Repo rate by 25bps to 7.75 per cent is unlikely to curb the current inflationary trend,'' said IMC President Nayan Patel in a press statement issued here today.

It can have some nominal impact on inflationary pressures. The basic thrust has to be on removal of supply-side constraints.

He said that the steps taken by RBI would sharply increase the interest rates on short-term credit to both the small and medium industries, and raise the prices of products to uncompetitive levels.

''This will be a blow to indigenous manufacturing industries, which are struggling to compete with the cheap foreign goods flooding the Indian stores, as a result of reduction in customs duties over the years,'' Mr Nayan Patel added.

UNI