The Hindu Business Line : Pressure on prices remains: Chidambaram

New Delhi, July 17 The Finance Minister, Mr P. Chidambaram, on Thursday said that the monetary measures taken by the Reserve Bank of India have started working even as he maintained that there was still pressure on prices.

At the same time, the Minister noted that he was in “broad agreement” with the RBI Governor’s position that rising trend of inflation will continue for some more time and that moderation could begin only after some months.

“I have repeatedly said that we will have to wait till monetary measures take effect. There are signs of monetary measures taking effect.

“M3 (broad money supply growth) has slowed down a bit. There is some tightening of liquidity as you can see in the call rates. If these monetary measures take effect, the Governor expects moderation over a period of time,” Mr Chidambaram told newspersons hours before official data on inflation was released.

The Minister felt that the RBI’s assessment of the inflation situation was “fair and correct”. On Tuesday, the RBI Governor, Dr Y.V. Reddy, appeared before a Parliamentary panel and submitted that the rising trend on inflation will continue for some more time and may start moderating only after six months.

Marginal rise in inflation

Official data released on Thursday showed that Wholesale Price Index based inflation for the week ended July 5 increased marginally to 11.91 per cent.

The Finance Minister’s comments on the inflation situation came less than a fortnight before the RBI’s Monetary Policy review slated for July 29.

It is widely expected that the central bank may go in for further tightening of monetary policy to rein in inflation. There are also expectations that the RBI may again surprise the market with more monetary tightening action before the policy review.

Only last month, the RBI had increased its key lending rate by 75 basis points to 8.5 per cent, its highest in six years.

The Central Bank had also hiked banks’ reserve requirements by 50 basis points as part of its anti-inflation measures.