labels: economy - general
Inflation control a priority: FM news
03 November 2006

Mumbai: Finance minister P Chidambaram today said containing inflation was the government''s immediate priority, cautioning that certain sectors of the economy were showing signs of overheating.

Chidambaram said that inflation needed to be contained at a moderate 4 per cent through a mix of fiscal and monetary steps, while addressing bankers in Hyderabad.

He said that inflation had risen to a four-month high of 5.41 per cent for the week ended October 21, was largely on account of rise in prices of primary articles. Rising domestic consumption and strong credit growth have also pushed inflation to a one-year high.

The FM said that he was satisfied with the country''s growth trend, though there were some signals of overheating in the economy, such as in commercial real estate and housing. He however expected the economy to grow at 8 per cent for the fourth year in a row.

The Reserve Bank has raised its lending rate four times this year to combat inflationary pressures, caused partly by the result of high oil prices, with the latest tightening this week. Its repo rate hike early this week was a signal that Reserve Bank was ready to take monetary steps to check inflation. The government would simultaneously take the necessary fiscal measures, he said. He admitted that the government had erred last year in supply-side management of food grains, especially wheat, forcing imports, but added that lessons had been learned this year.

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Inflation control a priority: FM