The Hindu : National : Efforts on to curb inflation

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Saturday, Nov 04, 2006
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Efforts on to curb inflation

M. Rajeev

HYDERABAD: Worried over the signals of "inflationary expectations," the Union Government has decided to initiate fiscal measures to contain inflation at four per cent.

"The rise in prices of primary articles is driving inflation and we are worried about our capacity to manage inflation on the supply side of foodgrains," Union Finance Minister P. Chidambaram said.

Recalling the "forced import" of wheat last year, he said the tremendous pressure on the prices was continuing, but the Government "will be able to manage the supply and ease inflationary pressures," with the lessons learnt from last year's experience.

Mr. Chidambaram was delivering the keynote address at BanCon - 2006, the annual conference of bankers here on Friday. He said that while the Government was upbeat that the manufacturing sector was catching up with the services sector, bankers must heed the words of caution.

Fiscal measures

The Reserve Bank of India had initiated monetary measures during the peak season credit policy and fiscal steps would be taken now.

The Finance Minister expressed concern over the exponential growth of credit witnessed in some sectors such as housing, credit cards and real estate and asked bankers to guard against building up "bubbles" in the segments.

Referring to the financial inclusion process set in motion by the banks, he lamented that concepts such as regional rural banks, "barefoot bankers" of yesteryear had moved off "our radar screen."

This was because of the blurring of distinction between the Regional Rural Bank (RRB) and the parent bank. "But we need to ensure that one of the first instruments of financial inclusion does not become blunt," he said.

Cooperative sector

There was also need to revamp the entire cooperative sector in tune with the Vaidyanathan Committee's recommendations for making them financially sound so that they could reach out to all rural households.

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