Advanced economies exporting inflation: Pranab

Macroeconomic policies followed by the developed world in the wake of the global financial crisis have created problems for inflation management in the developing countries, finance minister Pranab Mukherjee said today.

The policy of liquidity expansion followed by several advanced economies in a bid to jump-start their economies and cut down unemployment has created inflationary pressures in emerging economies as well, he said.

He cited the example of US Federal Reserve releasing $600 billion into the American economy in a second round of quantitative easing. Similar measures have been undertaken in the UK, Japan and some other industrialised nations.

''In today's globalised world one country's liquidity easily flows into another country. We find that this increased liquidity in the industrialised countries has generated inflationary pressure in virtually all emerging economies and some developing countries,'' he said.

Also, he said, in a globalised world, where the growing Indian economy is dependent on commodity imports in critical areas like fuel oils, edible oils and other primary imports, movements in international prices have a direct bearing on level of domestic inflation and its management.

The import-dependence of developing countries, especially India, has further contributed to inflationary trends being sustained over the past 12 months, the finance minister said.