Volatile crude prices a challenge for inflation-hit India: Pranab

May 5th, 2011 - 8:52 pm ICT by IANS  

Pranab Mukherjee Hanoi, May 5 (IANS) Finance Minister Pranab Mukherjee Thursday said that recent volatility in global prices of crude and food items was a challenge for India, which was already battling high inflation.

“In many EMEs, particularly India, food price inflation has led to general inflation. Recent volatility in global prices of food and fuel has, nevertheless, thrown up fresh challenges in management of inflation,” Mukherjee said at the annual general meeting of the Asian Development Bank.

“Price volatility now appears to be on the way to becoming a long-term and a global phenomenon,” he added.

The Reserve Bank of India Tuesday effected the ninth hike in key short-term interest rates in 15 months in a bid to tame high inflation. Both the repo and reverse repo rates saw a 50 basis point increase.

Though latest data showed a marginal decline in food inflation for the week ended April 23 at 8.53 percent, the annual inflation for March at almost 9 percent was still too high for the comfort of policymakers.

Mukherjee said that infusion of huge funds by central banks in the developed world to help economic recovery in the wake of the global financial crisis had contributed to volatile commodity prices.

“Since a significant part of inflation is due to imbalances and inadequacies in global financial and monetary management, one set of policies needs to address issues such as excessive liquidity and speculation, and another set of policies need to address other issues such as drought and floods in major producing countries, panic buying,” he said.

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