The Hindu : Business : Inflation moderation will take time, says FM

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Wednesday, May 09, 2007
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Inflation moderation will take time, says FM

Special Correspondent

Production of cereals, pulses has stagnated for many years

NEW DELHI: Union Finance Minister P. Chidambaram on Tuesday said he was `confident of moderating' the rate of inflation but appeared pessimistic about controlling it altogether in the long term unless the supply-demand mismatch in food items was eliminated.

Terming the increase in demand for food items as one of the four main reasons for the current inflationary trend, the Finance Minister told the Rajya Sabha during Question Hour: "we desire that it be moderated but in the long term it is possible only if the supply-demand mismatch is met. The production of wheat, rice and pulses has stagnated for the past ten years. There are other pressures too.'' "Every single measure is being taken by the Government and the Reserve Bank of India (RBI) and I am confident it will be moderated.

"With the RBI's monetary measures and the Government's fiscal steps and supply side management — though it will take time — I am confident it will be moderated.''

Poor FCI offtake

Grilled twice by CPI (M) and Bharatiya Janata Party (BJP) members, the Minister alluded to responsibilities of his Cabinet colleagues each time. Asked about the impact of poor off-take by the Food Corporation of India (FCI), he admitted that this was one of the reasons for building up of inflationary expectations. "This year, [Agriculture Minister] Sharad Pawar has told the Union Cabinet that a large quantity of foodgrains will be bought [by FCI].'' The second time, when asked about the scam in the export of pulses, the Minister said the controversial notification on the subject was issued by an institution "under the Commerce Ministry'' but the initial probe was conducted by a department "under my Ministry.''

Though he conceded that the NDA government had at times controlled inflation, Mr. Chidambaram also took a dig at the previous government by pointing out the structural differences in the growth process during the two regimes. "When the demand rises, the increase in credit will impact [the rate of] inflation."

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