More liquidity won't increase inflation, says FM

Finance Minister Pranab Mukherjee today said the Reserve Bank's move to inject Rs 48,000 crore into the system will help ease cash crunch, but will not add to inflationary pressure.

"I don't think so because the RBI is fully aware of the situation prevailing on the price front...I don't think this decision is going to adversely affect the inflationary trend but it will increase availability of liquidity," Mukherjee told reporters.

RBI today announced plans to inject Rs 48,000 crore into the system through purchase of government securities, technically called open market operations (OMO).

"I must appreciate that for the last two years the monetary policy which has been adjusted by RBI in tandem with the fiscal policy has helped us to maintain the level of growth to come up to the higher growth trajectory. And also we have been able to moderate the rate of inflation," Mukherjee said.

The Reserve Bank has also cautioned against the pressure on inflation from rising demand and global commodity prices. It said there is upward risk on its projection of 5.5 per cent inflation by this fiscal end.

Meanwhile, according to the data released here food inflation rose to 9.46 per cent during the week ended December 4, from 8.69 per cent in the previous week.