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Drive to beat inflation: The Union Finance Minister, Mr P. Chidambaram, leaving the residence of UPA Chairperson, Ms Sonia Gandhi, after a meeting in New Delhi on Saturday. - V. V. Krishnan

Our Bureau

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New Delhi, June 21 The Union Finance Minister, Mr P. Chidambaram, on Saturday reassured that the Government would take “appropriate measures” to contain and moderate inflation.

He broadly endorsed experts’ view that there should be no room for panic on account of the current situation of double-digit inflation.

In a statement issued soon after his meeting with the Reserve Bank of India Governor, Dr Y.V. Reddy, at his North Block office here on Saturday, the Finance Minister indicated that the Government would soon take steps to “quell inflationary expectations”.

Dr Reddy and Mr Chidambaram reviewed the inflation situation in a meeting that lasted over an hour.

Subsequently, Dr Reddy met the Prime Minister, Dr Manmohan Singh. Indications are that RBI may take more monetary measures in the coming days.

Responding to the poser of former Union Finance Minister, Mr Yashwant Sinha, that the Government could have gone for “deeper cuts in taxes”, Mr Chidambaram said in the statement that he had no quarrel with the proposition. However, he noted that it would not be wise to cut taxes and do an equally inflationary measure of borrowing an equivalent amount for financing expenditure.

“After the budget estimates were presented to Parliament, we have cut taxes and sacrificed considerable revenue. Only recently, we gave up revenues of Rs 22,000 crore. I may point out that giving up revenues and borrowing an equivalent amount in the market in order to finance expenditure would also be inflationary. Nevertheless, I will take Mr Sinha’s suggestion on board and will explore the options,” Mr Chidambaram said.

The Finance Minister’s statement highlighted that the most important driver of the current inflation was the relentless rise in crude oil prices. Since the Budget 2008-09 was presented on February 29, 2008, crude oil prices have increased by 37 per cent.

The Centre administers the prices of only four petroleum products — petrol, diesel, LPG and kerosene (PDS). All other petroleum products and derivatives are sold at market prices. When crude oil prices rise, those prices also rise.

For the week ended June 7, the week-on-week increase in inflation was 1.77 per cent.

Of this, the petroleum products, under administered prices, contributed 0.79 per cent and other petroleum products contributed 0.88 per cent, making a total of 1.67 per cent.

Thus, fully 94 per cent of the week-on-week increase in inflation is attributable to petroleum products.

However, the situation on the food front was comfortable and there was no cause for worry on rice and wheat, the statement noted. “We take comfort in the fact that there has been record production of wheat and paddy and we have adequate stocks. We have procured 220 lakh tonnes of wheat and, so far, 260 lakh tonnes of rice. We will provide adequate wheat and rice to the PDS and we will also use our stocks to moderate prices in the open market”, Mr Chidambaram said.

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Measures soon to contain, moderate inflation

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