Monetary measures having salutary effect on prices

New Delhi, June 22 (UNI) Commenting on the headline inflation rate receding to its 57 week low of 4.28 per cent, Finance Minister P Chidambaram today said tightening of monetary measures was having its desired impact, but added that growth needs to be balanced with price rise.

"Monetary tightening measures are having their impact. It is too early to reach any conclusion. We have to watch what happens in the next three or four weeks," Mr Chidambaram told newspersons on the sidelines of a function.

Data released here this morning showed that the headline inflation rate receded to its 57-week low of 4.28 per cent during the week ended June 9, primarily as a result of a decline in prices of food items. It was 4.80 per cent a week ago.

"I have always maintained that there should be a balance between inflation and growth," he said.

Economic theory is replete with myriad debates on the trade off between growth and maintaining price stability. The Finance Minister was apparently hinting that too harsh a tighetining of monetary policy could adversely impact on growth prospects.

In a bid to control inflation, the RBI has been following a tight monetary policy, including a series of hikes of Cash Reserve Ratio and the repo rate. The attempt to suck liquidity out of the system, however, sent interest rates Nothwards.

Mr Chidambaram today gave the indication that this policy was finally having a sobering effect on prices.

UNI