He attributes price rise to demand-supply mismatch, depreciating rupee, global commodity prices
The Centre admitted on Tuesday that more needed to be done to control prices, hoping that inflation would come down to a more acceptable level of 6-7 per cent by March-end.
“There has been a steady improvement in the inflationary situation in India, but there are important tasks ahead to be undertaken to get the desired outcomes,” Union Finance Minister Pranab Mukherjee told the Lok Sabha in asuo motustatement.
He attributed the rise in prices to the demand-supply mismatch, the depreciating rupee, the global commodity prices and the easy monetary policy followed by some countries.
Laying the statement on the table of the House because of the noisy scenes caused by the Opposition, Mr. Mukherjee said that at times of rapid growth and structural changes — which India was passing through now — inflation did tend to increase.
The House is expected to discuss the statement on Wednesday.
The Left parties moved an adjournment motion in the Lok Sabha, but since the House did not function, it could not be taken up and will be pursued on Wednesday, when the issue will be raised in the Rajya Sabha too. The Bharatiya Janata Party and its allies have extended support to the Left parties on matters related to price rise and inflation.
Inflation has been standing at more than 9 per cent since December 2010. The headline inflation measured on the wholesale price index was 9.7 per cent in October, while the rate of price in the food segment for the week ended November 5 was 10.6 per cent.
Mr. Mukherjee said that when India depended on commodity imports in a globalised economy, the movement in international prices directly impacted the domestic inflation and its management. The macroeconomic policy the developed world pursued after the global financial crisis had also created problems for inflation management in the developing countries.
As for the weakening of the rupee against the dollar, he said whatever benefit that could have derived from the softening of international commodity prices was wiped out by the depreciation. The Reserve Bank of India was closely monitoring foreign exchange markets. “The RBI has been monitoring the foreign exchange markets closely, and will take required action in the light of international developments as the situation unfolds.”
A durable solution to inflation in an economy with rising income levels lay in improving agricultural productivity, strengthening food supply chains and augmenting capacities in the manufacturing sector to keep pace with the growth in demand. “We … are addressing the policy lacunas and creating mechanisms to catalyse the required activities. The State governments have to do the needful in several areas, particularly in agricultural extension, public investment in agriculture and agriculture marketing…,” he said, urging the States to take advantage of the various initiatives launched by the Centre.