The Hindu Business Line : `Inflation will moderate when wheat, potato crops come in'

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New Delhi March 6 The Finance Minister, Mr P. Chidambaram, on Tuesday expressed confidence that inflation would moderate once the new wheat and potato crops come into the market.

"Our inflation today is high... When the wheat crop comes in, inflation will moderate. When the new potato crop comes in, inflation will moderate," Mr Chidambaram told Rajya Sabha here today.

He also said the Government would not hesitate to import pulses for overcoming any shortages. The Finance Minister highlighted that the pulses consumed in India are grown only in Myanmar, Turkey and in small quantities in Canada.

Mr Chidambaram denied that there was "disconnect" between the Finance, Agriculture and Commerce Ministries.

"I stoutly deny this accusation", Mr Chidambaram said, responding to Bharatiya Janata Party (BJP) member Mr Ravi Shankar Prasad's observation that there was a disconnect between the three Ministries and that the price rise was mainly due to mismanagement by the Government.

The Finance Minister said inflation was over 6 per cent even during 2000-01.

"The (then) Government took 12-18 months to moderate inflation rate in 2000-01" when it hovered over 8 per cent for 12 weeks and above 6 per cent for 48 out of 52 weeks.

Mr Chidambaram said the current rate of inflation was not as high as 2000-01 and that the Government was confident that inflation would be moderated.

He said there was stagnation in production of wheat, paddy and pulses. Mr Chidambaram said the Government imported 55 lakh tonnes of wheat over the last one year but could not get enough supplies of pulses.

The Finance Minister highlighted that Government has not allowed export of pulses and added that allegations against three exporters for defying the ban are being investigated.

Consumer price index

The consumer price index (CPI) based inflation rate for the agricultural labourers (CPI-AL) and rural labourers (CPI-RL) for the month of December 2006 was 8.94 per cent and 8.31 per cent respectively.

"The increase in the rate was primarily due to a high rate of inflation of food articles which has a substantial weightage in the commodity basket of these indices," he said.

The Finance Minister assured the Rajya Sabha that fiscal, monetary and supply side steps would be taken to moderate inflation. "Inflation spurts of the past have been moderated and we are confident of moderating the current rise," he said.

Stating that demand-supply mismatch fuelled inflation, Mr Chidambaram said augmenting production and productivity was essential to erase this gap.

Budget 2007-08 has tried to address the shortcoming on the supply side by addressing key factors like water, seeds, fertilisers, power and farm credit.

He also noted that while crude oil prices have declined from an all-time high of $75 per barrel, metal prices have spurted in international markets.