Reducing inflation a priority for New Delhi

Published Dec 12, 2013

Share

New Delhi - Tackling inflation would be a key priority, India’s finance minister and central bank governor said yesterday, after high prices contributed to painful losses for the ruling Congress Party in recent state elections.

Finance Minister Palaniappan Chidambaram reiterated his pledge for fiscal discipline as investors worry the Congress-led minority coalition will boost spending to improve its standing ahead of general elections due early next year.

Data today is expected to show India’s annual consumer inflation rate remained high at 10 percent last month.

High inflation will increase expectations the Reserve Bank of India will raise interest rates for a third time in four months, even as the economy grows at its slowest in a decade.

Although rate hikes are unpopular with businesses and investors, Chidambaram said the government could ill afford to saddle citizens with high prices for food staples.

“It is common knowledge that the government of the day will pay a price for high inflation, especially if inflation persists over a long period of time,” Chidambaram said.

Calling monetary policy a “blunt instrument”, he said the government would need to tackle structural bottlenecks that kept food prices high.

Congress lost four key state elections, results on Sunday showed, as Prime Minister Manmohan Singh’s government has been criticised for policy drift and allowing corruption to spin out of control.

Inflation has been another thorn. Central bank governor Raghuram Rajan said: “Our effort is firmly on controlling inflation.” The central bank holds its next policy meeting on December 18. – Reuters

Related Topics: