Chidambaram links Inflation to oil prices and prays

New Delhi, Jul 16: Finance Minister P Chidambaram today said inflation will come down to tolerable levels if crude prices do not rise again and assured investors that current account deficit (CAD) would be financed without dipping into forex reserves.

The Minister also promised more policy decisions in the coming days saying "reforms is a work in progress".

Addressing a gathering of venture capitalists and private equity (PE) funds, the Minister called upon them to support at least 500 entrepreneurs and mentor them on good financial practices, corporate governance and labour laws.

Referring to inflation, Chidambaram said the government has taken steps and more measures will be taken on the supply side bottlenecks to moderate it.

Can't promise zero inflation

"But I can't promise you zero inflation... If crude oil prices do not spike up again, we can contain inflation to a tolerable level", Chidambaram said.

He said inflation, which was hovering around 9 per cent, has been brought down to below 5 per cent in the last nine months.

However, the headline inflation which was on decline for four months inched up in June to 4.86 per cent.

India depends on imports to meet 80 per cent of its crude oil requirements.

On CAD, Chidambaram said the deficit was financed last fiscal without dipping into the foreign exchange reserves and this year it would be contained below the 2012-13 level of 4.8 per cent of the GDP.

"At the end of the year (2012-13) not only we financed the CAD, we also added $3.8 billion to our reserves. This year, the CAD looms large.

"We are doing our sums and we are confident that with some stern measures that we have taken and we will take, we can contain the CAD to a level below last year's CAD. We will finance it fully and safely without running down reserves," he said.

Rupee below 60

Meanwhile, the US dollar ended lower against the rupee at 59.31/32 per dollar and the Pound Sterling also finished cheaper at Rs 89.52/54 per pound at the close of the Interbank Foreign Exchange Market (Forex) today.

Following are the Interbank Forex and RBI rates: (In Rs Per Unit) Unit Interbank RBI Reference US Dollar 59.31/32 US Dollar Rs 59.3925 Pound Sterling 89.52/54 Euro Rs 77.7250 Euro 77.82/84 Japanese Yen (100) 59.67/69.

PTI