Inflation still a concern: Pranab

Union finance minister Pranab Mukherjee today said inflation was an area of concern, but the government hoped that a combination of monetary and fiscal policies would ease it in the coming months.

“Food inflation has come down from 20 per cent in February 2010 to 8.9 per cent in March 2011. But still it is very high and should be further reduced,” Mukherjee said at a press meet on the forthcoming Assembly elections in West Bengal. India’s food inflation declined marginally to 9.18 per cent for the week ended March 26, against 9.5 per cent in the previous week. Rising international crude prices have been impacting domestic petroleum prices, which had been recently decontrolled by the government.

“Inflation is a matter of great concern. Both in terms of supply and demand, we have taken necessary steps. Steps have been taken to increase the production of this commodities which are in short supply. This will remove the supply side constraints,” he said.

“On the demand side, to mop up the excess liquidity, RBI has adjusted repo and reverse repo rate, as a result the excess liquidity is being mopped up. These measures will impact inflationary tendencies, but inflation is still an area of concern,” he said.

In March, the Reserve Bank of India had hiked key policy rates, eighth time in a year to tame inflation. It also revised its WPI (wholesale price index ) inflation estimates for March 2011 to 8 per cent, against the earlier estimate of 7 per cent. Last month RBI had raised repo rates, rate at which our banks borrow rupees from RBI to 6.75 per cent from 6.50 per cent. It raised reverse repo, the rate at which banks park their short-term excess liquidity with the Central Bank, to 5.75 per cent from 5.50 per cent.