Government banks on monsoon, rate hikes to tame inflation

August 16th, 2011 - 6:15 pm ICT by IANS  

Pranab Mukherjee New Delhi, Aug 16 (IANS) The government is hopeful that the series of rate hikes by the Reserve Bank of India (RBI) and good monsoon would help moderate inflationary pressures in the country, Finance Minister Pranab Mukherjee said Tuesday.

“The measures taken to remove supply constraints in some of the agricultural products and the monetary policy adopted by the RBI will help bring about moderation of inflationary pressure,” Mukherjee told reporters here.

He said the government was working in tandem with the RBI to bring down inflation to a comfortable level.

The minister said good monsoon would ease the supply-demand gap and help bring down inflation, particularly food inflation.

“I am quite confident that good monsoon will ensure moderation of inflationary pressure,” said Mukherjee while reacting to the monthly data on inflation.

The headline inflation based on wholesale price index declined marginally to 9.22 percent in July from 9.44 percent in the previous month, official data showed Tuesday.

The minister said decline in monthly inflation was “good news”.

Reacting to the monthly inflation figure, Planning Commission Deputy Chairman Montek Singh Ahluwalia said the decline was along expected lines and the government would remain vigilant as the figure was still much above the comfort level.

“It’s good that it is declining but it is still high. We have to be vigilant,” Ahluwalia said.

The RBI has hiked its policy rates 11 times since March 2010 to curb inflation.

Despite the consecutive rate hikes, inflation has remained stubbornly high, almost near double-digit, much above the central bank’s comfort level of 4-5 percent during the last one and half year.

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