Inflation will come down by December: Pranab

October 31st, 2011 - 5:52 pm ICT by IANS  

Pranab Mukherjee New Delhi, Oct 31 (IANS) Inflation will come down by December as necessary steps have been taken to remove supply-side bottlenecks, Finance Minister Pranab Mukherjee said here Monday.

“Current inflation pressures are because of supply-side constraints of agricultural products,” Mukherjee told reporters here, adding the government has taken steps to remove supply-side bottlenecks.

“Steps have already been taken. I hope it will have impact and from November-December onwards, the rate of inflation will be moderating,” he said.

Food inflation touched 11.43 percent last week, raising concerns in the government. Food inflation was 7.5 percent in 2006-07 and had increased to 14 percent in 2010-11.

Overall inflation has remained stubbornly high near double-digit since January 2010. The headline inflation based on the wholesale price index was recorded at 9.72 percent in September.

The soaring food inflation comes even as the Reserve Bank of India (RBI) hiked key interest rates for the 13th straight time last week.

Mukherjee said there is excess liquidity in the market and that efforts have been made to curb it.

“There was some liquidity excess which was required to be mopped up and through the adjustment of interest rates, efforts have been made to mop it up.”

The apex bank had hiked key interest rates by 25 basis points, which translated into the repurchase rate, or the interest the central bank levies on short-term borrowing by commercial banks, being raised to 8.5 percent from 8.25 percent.

Automatically, the reverse repurchase rate, or interest on short-term lending, gets hiked to 7.5 percent from 7.25 percent.

The finance minister expressed hope that the G-20 leaders meeting slated to be held in Cannes, France, would yield results on the solvency issue.

“Emerging economies are looking at the Cannes summit with great expectations. The basic problem is solvency issues,” Mukherjee said.

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