The Hindu Business Line : Govt looking at stronger measures

New Delhi, June 20 The Union Finance Minister, Mr P. Chidambaram, on Friday promised to consider “stronger measures” on both the “demand and monetary” side to tame inflation.

The rate rose to 11.05 per cent, a 13-year high, as auto-fuel and cooking gas price increase in early this month got factored into the wholesale price based inflation index.

Noting that the latest spurt in inflation was “expected” and mainly contributed by rise in prices of petroleum products, Mr Chidambaram told presspersons here that these were “difficult times” and expressed hope that the people would understand the difficult situation faced by the Government.

“When the administered prices on petrol, diesel and LPG were increased (on June 5), we had cautioned the Cabinet that this would lead to double-digit inflation and that was what has happened,” he said even while maintaining that the June 5 price rise was inevitable and an unavoidable increase.

Petro products

Mr Chidambaram pointed out that roughly 94 per cent of the increase over the last week was contributed by petroleum products.

He, however, declined to go into the specifics of the “strong measures” that were being contemplated. The Government would address the inflation issue to the best of its abilities.

The steep increase in inflation has raised fears that the Reserve Bank of India may resort to further monetary tightening, leading to hardening of lending rates for automobile, housing and consumer loans.

The benchmark equity share indices plunged on inflation worries and trade and industry associations were quick to express concern that things were getting out of control of the Government on the inflation management front.

The Government and RBI have been taking a series of measures on fiscal as well as monetary side.

While the Centre has undertaken several rounds of duty cuts, the RBI has been resorting to cash reserve ratio and repo rate hikes.

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