Even while expecting inflation to come down to 5-6 per cent by the year-end, the Central Government on Tuesday did not rule out Reserve Bank of India (RBI) intervention if inflation was due to money supply.
The Centre also intended to rejig subsidies in the days to come.
Talking to reporters, Cabinet Secretary K. M. Chandrasekhar said that inflation was expected to come down to 5 to 6 per cent by December-end if the monsoon continued to be good, which was expected to bringing down food inflation.
The government claimed to have stabilised prices of food articles for about three to four months now, but Mr. Chandrasekhar regarded prices of pulses as a problem area and saw no respite in the next two to three years with mismatch between demand and supply being about 6 million tonnes.
At the same time he felt that the RBI would have to take a call on the causes of inflation and tighten its monetary policy to squeeze out excess liquidity.
The RBI is scheduled to review its policy on July 27.
He also pointed out the government's intention to rejig its subsidy mechanism in a way as to ensure that it reached the poorest on the one hand and incentivise production at the same time. His stress was on the way the government had redesigned the fertilizer subsidy without affecting the farmers.
