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Updated: June 14, 2010 19:26 IST

Montek for RBI action to arrest inflation

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Deputy Chairman of Planning Commission Montek Singh Ahluwalia. File photo
Deputy Chairman of Planning Commission Montek Singh Ahluwalia. File photo

As the latest inflation data breached the double-digit barrier, the Planning Commission on Monday suggested that the Reserve Bank aim at curbing the galloping prices.

Planning Commission Deputy Chairman Montek Singh Ahluwalia said he agrees with the suggestion of Prime Minister’s Economic Advisory Council (PMEAC) Chairman C. Rangarajan that rising inflation and not robust industrial output should guide the RBI.

“...I completely agree with (Mr. Rangarajan)”, he said, when asked whether like the PMEAC, he too, favours policy action by the central bank to curb inflation, which crossed the double digit mark in May at 10.16 per cent, hitting a 19-month high, as per provisional figures.

The RBI is scheduled to announce the first quarterly review of the monetary policy on July 27, during which the Central bank could take some action to deal with the deteriorating price situation.

Late last Week Rangarajan had told PTI that the RBI should look at the May inflation data and not the robust April IIP numbers to decide before finalising its next policy move.

The industrial production rose by 17.6 per cent in April — the second best in over a decade.

“It would be completely absurd to start tightening monetary policy simply because the (industrial) production has increased. The only reason to tighten monetary policy is that if you feel that inflation has gone too high,” Mr. Ahluwalia said.

“In this case, a little bit of inflation is picking also got good is increasing...that is why Rangarajan must have said inflation should be the basis (for tightening the monetary policy). I think that inflation is the relevant thing,” the Planning Commission chief added, even though he hoped that inflation would moderate in the coming months.

“There is no doubt that in the first few months there has been rise in inflation. Our assessment is that it is going to come down towards the end of the year. I think that remains my view and you will see (that),” he said.

Prime Minister Manmohan Singh last month had said inflation would moderate to 5-6 per cent by the end of the calendar year.

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