The Hindu Business Line : Inflation at 1-year high; steps assured to check rise

Matter of concern
Inflation up on back of higher energy, food prices
No pressure on interest rates, says Minister
State Govts must act against hoarding

New Delhi , June 23

With inflation crossing the five per cent mark for the first time in the last 12 months to touch 5.24 per cent for the week ended June 10, the Finance Minister, Mr P. Chidambaram, on Friday said that the Government would take further steps if needed to dampen inflationary expectations.

He expressed confidence that the recent measures on the monetary, fiscal and import fronts would moderate inflation in the economy.

"There is some upward movement in inflation since March 2006. Monetary steps have been taken, some fiscal steps have been taken and action was taken on the import side yesterday. I am confident these steps would moderate inflation. If necessary, we will take further steps," he told newspersons.

Reacting to the inflation data released today, Mr Chidambaram said that the rise in inflation in the week ended June 10 was due to the pass-through of fuel price hike effected on June 5.

He accepted that inflation was a matter of concern for any Government.

Inflation for the week ended June 10 spurted to 5.24 per cent from 4.72 per cent a week earlier on the back of higher energy and food article prices.

It surpassed the 5.20 per cent level that was recorded in the last week of May 2005.

"When our Government came to office, inflation was moving upward. But as I had said we would moderate inflation, we did so. In 2004-05 and 2005-06, inflation was moderate, between 4-4.5 per cent."

Asked whether a rise in yields on 10-year Government paper would put pressure on interest rates, the Finance Minister said: "Don't go by one week's spurt."

The yield on the 10-year benchmark Central Government paper increased to a four-year high of 8.13 per cent.

The latest inflation data and the spurt in yields of 10-year Government paper have heightened the expectations of an all-round increase in interest rates in the economy.

Earlier this month, the Reserve Bank of India increased its short-term interest rates.

As part of a multi-pronged strategy to dampen inflationary expectations, the Government on Thursday allowed duty-free import of wheat by private parties and halted all exports of pulses with immediate effect.

The Finance Minister had also urged the State Governments to look into the issue of hoarding of food stocks and take appropriate action to correct any such situations.

"It is possible that in some States there are hoarding of food stocks. I urge the State Governments to take necessary action."