Strong GDP growth cannot exist with inflation control, says Chidamabaram; RBI ready to act says Reddy news
16 April 2008

New Delhi: Finance minister P Chidambaram today said that measures to control inflation like tightening money supply to drain excess liquidity from of the economy could not go hand in hand with  robust economic growth.

Annual wholesale price inflation rose to 7.41 per cent in late March, the highest in over three years.

Responding to a debate on the price rise in the Rajya Sabha this morning, the Chidambaram  said that one  could not have both when BJP leader Murli Manohar Joshi observed that tightening money supply would impact growth.

The finance minister had said recently that the government would not shy away from sacrificing some growth in order to control inflation.

The government has have scrapped import duties and banned exports for some commodities like rice and steel to cool price pressures.

This morning RBI governor YV Reddy  said in New York that the  bank was ready to take action as required since inflation had risen more than expected to unacceptably high levels.

"While this situation requires constant monitoring, any action, any time that is required will have to be taken," he said.

Reddy said that some inflationary pressures had been anticipated but it turned out to be far more intense that what had been anticipated.

RBI has said in 2007-08 that inflation had to be contained near the 5 per cent level during the fiscal year.

The RBI is due to announce the annual credit policy on 29 April with opinion differing on whether the bank would further tighten liquidity. Economists expects the CRR to be hiked in view of inflation touching a three-year high of 7.41 per cent, rather than interest rates being raised as growth is increasingly showing signs of moderating.


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Strong GDP growth cannot exist with inflation control, says Chidamabaram; RBI ready to act says Reddy