RBI will act to keep inflation under the lid: FM

As it bets on a good monsoon for food prices to ease, the government today said the Reserve Bank (RBI) will consider appropriate policy actions to tighten money supply to bring down inflation.

Wholesale prices-based inflation for May climbed to 10.16 per cent, driven by costly food items that have been so since monsoon, which accounts for 80 per cent of rains the country receives, failed last year.

The weather office has forecast a near normal monsoon this year, although it has been slow to advance across the country.

"Food inflation has started coming down a little bit, (but) not fully. With the expectation of good monsoon and crop, I think moderating influence will be there from the middle of July onwards," Finance Minister Pranab Mukherjee told reporters here.

Food inflation stood at 16.74 per cent as of May 29, but is off the 20 per cent high seen in December last year.
    
"So far as the monetary part is concerned, the Reserve Bank will look into it, will consider it," Mukherjee said.
    
"Even in the last policy announcement, 25 basis points were increased... So, as and when the Reserve Bank feels appropriate steps are required to be taken to control the inflation, it will do so," he added.
    
The Reserve Bank has raised rates twice this year to check food inflation from spreading to manufactured goods, but with inflation continuing to rise, economists expect another round of policy action even before the scheduled July 27 review of monetary policy.
    
The Minister attributed rising prices to shortage of certain commodities, besides the impact of base effect.
    
"To tackle the problem, whatever is required from the supply side, we have already taken those steps. Commodities is in some short supply (and) to meet the balance, we have allowed duty free imports...," the Finance Minister said.
    
On possibility of raising fuel prices, Mukherjee said, "The report of the Kirit Parikh committee is there. We have had one meeting of the government...We could not take the decision. As and when the meeting takes place, the government will take a decision."