Inflationary expectation causing price rise: Chidambaram

April 20th, 2008 - 7:51 pm ICT by admin  

A file-photo of P. Chidambaram

Kannur (Kerala), April 20 (IANS) Finance Minster P. Chidambaram said it is inflationary expectation that is causing price rise in the country and the government has taken all steps to bring down prices. He was speaking at a development seminar organised by the district committee of the Congress here Sunday.

“Generally people believe that the prices will rise. This is what we call inflationary expectation. Inflationary expectation is worse than inflation,” said Chidambaram.

He said when people think the prices will rise they will pay more and buy more. He added the price rise is temporary and it will come down.

“The prices will moderate. The international prices will moderate. When international prices moderate, Indian prices will also moderate.”

The government has taken a number of fiscal steps to bring down the prices. “I have cut customs duty and excise duty. I have cut income tax that put more money in the pocket so that people are not affected by the price rise.”

He said that monetary steps were also taken to contain inflation. The Reserve bank of India (RBI) increased the Cash Reserve Ratio by 50 basis points again to cut liquidity. The government has also initiated administrative steps to bring down the prices.

“I wanted to believe that the price rise is not for ever and ever. We will moderate the prices. The government is committed to moderate the prices.

“This is not the first time that the inflation has gone beyond seven percent. When UPA government came into office the inflation has already touched seven percent. We brought it down to 3.11 percent,” said Chidambaram.

He said during the rule of the National Democratic Alliance in 2000-2001, for 48 weeks of that year inflation was above six percent and above seven percent for 22 weeks.

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