Chidambaram: monetary policy has small impact on food, fuel inflation

The RBI raised the repo rate by 50 basis points over October and September

 

 

Consumer inflation in India is entrenched due to high food and fuel prices, and monetary policy has little impact in curbing these prices, said Finance Minister P Chidambaram on Friday.

"I have been advised that inflation has got entrenched and monetary policy does not have any or has very little impact on food prices and fuel prices," Chidambaram said at a function.

India's consumer price index inflation quickened to 10.09% in October, higher than 9.84% in September due to food and fuel prices, fuelling expectations of a rate increase by the central bank at its next policy review on December 18.

"Demand (for food and fuel) is being stoked by the fact that we have high fiscal deficit and that fiscal deficit was not contained for a fairly long period, I think over a period of two years," Chidambaram said.

The Reserve Bank of India raised the repo rate by 50 basis points over October and September to fight stubborn and elevated CPI even as economic growth languished close to a decade low of 5%.

Chidambaram also said he expects India to grow 6% in the 2014/15 fiscal year ending March 2015, 7% the following year and 8% in the next.