Thaindian News

New Delhi, Dec 15 (IANS) Despite the recent decline, inflation still remain high at an “unacceptable” level but the government has very limited tools to curb it, Finance Minister Pranab Mukherjee said Thursday.

“Despite declining trend, inflation is at unacceptable levels. There are also immediate concerns related to fiscal deficit and current account deficit,” Mukherjee said here at the Delhi Economics Conclave — a major international conference on Economic Policies for Emerging Economies attended by economists, policy makers, trade and industry representatives, experts from financial sector, academicians and researchers.

Food inflation declined to a four-year low of 4.35 percent for the week ended Dec 3. Food inflation has dropped sharply in the last one month after hovering around double-digit for almost two years.

However, the overall inflation continue to remain high almost near double-digit. The headline inflation based on the wholesale price index was recorded at 9.11 percent in November, according to the latest official data.

Mukherjee said there were limited monetary and fiscal measures to curb the general price rise.

“Innovative remedies would be required to address these challenges simultaneously. Options for fiscal steps as well as monetary measures are increasingly limited,” he said.

The Reserve Bank of India has hiked key policy rates 13 times since the beginning of 2010 to curb the inflationary pressure. Despite the aggressive monetary tightening inflation has remained at high levels, much above the RBI’s comfort level of 4-5 percent.

Mukherjee said the higher interest rates had negatively impacted industrial output and economic growth and it was a matter of concern.

“The struggle against inflation and tightening interest rate regime has contributed to lowering of growth in demand and investment. The slowdown in industrial growth is of particular concern as it impacts employment,” the finance minister said.

The finance minister’s comments come ahead of the RBI’s mid-quarter review of monetary policy Friday. Most analysts feel that the central bank is unlikely to raise rates further.

Mukherjee said the government would push for the reforms to boost economic growth.

“In recent months, the government has sought to unlock economic bottlenecks through initiatives such as the National Manufacturing Policy, permitting greater FDI in retail sector, Direct Taxes Code, Goods and Services Tax, and various legislations including in the financial sector,” he said.

“We hope that greater consensus on these initiatives will help speed up their implementation,” the finance minister added.