Inflation up a tad, govt relieved

Sat, May 10 12:50 AM

India's annual inflation rate rose marginally to a near four-year high of 7.61 per cent due to high food prices and the government said it would take more steps to cool down prices. "More administrative steps will be taken as and when they become necessary to check inflation," Finance Minister P.Chidambaram said on Friday.

Wholesale prices-based inflation shot up to a 42-month high of 7.61 per cent for the week ended April 26 as against 7.57 per cent in the previous week and stood at 6.01 per cent in the corresponding week a year ago. "In our assessment means it is stable and not statistically significant," Chidambaram said.

The government on Monday extended the ban on futures trading to four more agriculture commodities-- chana (gram), soyaoil, potato and rubber. It has earlier banned export of certain basic staples like rice and pulses and cut customs duties on other items to try to rein in inflation.

The Reserve Bank of India (RBI) has raised the cash reserve ratio (CRR), the amount of funds banks have to keep as deposit with the central bank, by 0.25 percentage points to 8.25 per cent. "When the steps come together and take effect, there will be moderation.

That's what the Prime Minister suggested in Bangalore. One must have faith that these steps will yield results," Chidambaram said.

"We are in the process of persuading cement companies to roll back prices. If that succeeds, that will also be an administrative step", the finance minister said.

Chidambaram said the government was concerned as everyone else. "Every week there is a rollout of some steps or the other.

If necessary more steps will be taken," he said. Former RBI Governor and Rajya Sabha member Bimal Jalan said some hard decisions might be required to soften prices.

Eminent economist and Columbia University professor Jagdish Bhagwait disagreed with the decision to ban derivatives trading in some commodities. "The ban on commodities trading does not make any sense, you should forget it.

If your intention is to become a financial centre, you do not want to take these measures. They don't help very much and undermine your long term objectives,"Bhagwati said.

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