Free food movement will help curb inflation

"Inflation rate is higher than what we want it to be... and raising interest rate is not the best way to curb inflation," Finance Minister's adviser Subhashish Gangopadhyay said at a panel discussion held by chamber PHDCCI here.

He said the food inflation was on account of domestic reasons, arising from restrictions on movement of goods.

"We have too many constraints on food movement," he said, adding that global factors were only driving up prices of fuel and primary articles.

Inflation for the week ended May 10 stood at a 44-month high of 7.82 per cent, as prices of industrial fuel such as naphtha and jet fuel went upThe only relief was that wheat procurement has touched a record 20.7 MT so far this year.

Gangopadhyay was emphatic that any anti-inflationary measure that hurts investment was not a good thing and in this context, felt that raising interest rates would have serious implications for the economy, "especially when we are aiming for high growth Reserve Bank has, this year, twice raised the percentage of cash that banks must keep in reserve to suck out excess liquidity from the banking system - a move aimed at tempering demand for loans and in turn to cool consumption".

"Although government has unleashed several measures such as banning export of non-basmati rice, slashing import duty on edible oils and goading steel and cement makers to hold prices to help contain inflation, many expect the Reserve Bank to take additional monetary measures to complement the government's efforts".