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Quick steps to check inflation harmful: Montek

BS Reporter  |  New Delhi 

Planning Commission Deputy Chairman Montek Singh Ahluwalia warned that any extraordinary steps to contain inflation may prove counter-productive.
Just a couple of days earlier, Ahluwalia said there were indications of the economy overheating, as was reflected in demand pushing ahead of capacity in certain sectors, and in turn, leading to price rise.
"One should not look for instant results (from steps taken to check inflation). Very quick steps may result in damages," Ahluwalia said today.
Avoiding a direct reply, the Plan panel's deputy chairman, added that the government had taken several steps to check the price rise and it would take some time before the results are visible.
Ahluwalia seemed to have taken a cue from Prime Minister Manmohan Singh and trying to pull back on his earlier warning on the economy overheating. Only Yesterday Singh had played down 'overheating' fears and said that rise in inflation rate was a temporary phenomenon as growth impulses in India were very strong.
Despite several inflation-containment measures by the central government and action on the monetary front by the Reserve Bank of India, the annual rate of inflation continues to hover around the six per cent mark.
The RBI tightened money supply, while the government reduced customs duty on a number of raw materials. The government also allowed duty free import of wheat and was desperate to convince the cement manufacturers to roll back the price hike announced after the Budget.
Crisil Chief Economist Subir Gokaran is of the opinion that inflation will continue to hover around 6 per cent, but would moderate in months to come.

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First Published: Fri, March 23 2007. 00:00 IST