Sunday 30 March 2008

Inflation scares the Govt, may take steps on Monday

Concerned at "disturbing" inflation, that spiralled to over 13-month high of 6.68 percent, the government has decided to hold a meeting of high-level Cabinet Committee on Monday to take stock of rising prices, Finance Secretary D Subbarao said on Saturday.

A high-level Cabinet Committee will meet on Monday to take stock of high inflation that has surged to over 13-month high of 6.68 percent, a top finance ministry official said on Saturday.

"The Cabinet Committee on prices will meet on Monday," Finance Secretary D Subbarao told reporters on the sidelines of a seminar on proposed amendments to `securities contracts (regulations) rules`.

Earlier addressing the seminar, Subbarao said yesterday`s inflation numbers, which were quite disturbing, were partly due to high global commodity prices.

Commodity prices are rising globally despite fears of recession in the US, he said at the seminar organised by the Institute of Company Secretaries of India.

"Generally, we expect commodity prices will go down when there is recession in the developed countries. If you look at past recession in the US, there is depression in commodity prices. But, this time there is elevation in commodity prices together with recession in the US," he said.

Together with surging inflation, the rupee had also risen yesterday to the highest level in a month to go below crucial 40-level to stand at 39.89/90 against the dollar, up 20.50 paise over the previous closing.

Subbarao said exports have come under double pressure because of appreciation in the rupee and low demand due to recession in the US.

Metal and food prices spurted inflation to the highest number in over a year, much above the RBI`s tolerance level of 5 percent.

Finance Minister P Chidambaram had said yesterday that the government would take every measure to keep prices under check, even at the cost of slowing down the economic growth.

"The government is determined to take all steps -- fiscal, monetary and supply side -- to moderate inflation and if that means we have to live with slightly lesser growth, so be it," he had said in Mumbai.

Describing inflation as a regressive tax, he had said, "we have to balance between inflation and growth."

Attributing high rate of inflation to global crude, food and commodity prices, the Finance Minister had said interest rates are the most effective instrument to contain price rise.

Analysts also said they did not rule out further tightening of monetary stance by the reserve bank at its annual monetary policy review, slated for April 29, even if it costs some growth.

Commerce Minister Kamal Nath had said in Delhi, "any rise in inflation is a matter of concern ...Government is looking at a proposal to ban non-basmati rice exports. We are also going to recommend scrapping of import duty on steel."