Union Finance Minister Pranab Mukherjee on Monday said he expected the rise in the food inflation rate to continue till the middle of July, after which he expected things to improve with the onset of monsoon.
Speaking on the sidelines of a meeting of Chief Ministers and Financial Representatives from the north-eastern States here, Mr. Mukherjee said the “rising rate of food price inflation is a matter of concern.”
“It was 9.8 per cent in March. But now, it has reached double-digit,” he said.
The food inflation rate, which had risen as high as 21 per cent in November last, had remained erratic in the following months.
Mr. Mukherjee said efforts were on to improve the supply side with the import option being kept open. “For instance, our pulses requirement is around 18-19 million tonnes. While we are being able to supply 14-15 million tonnes, there is still a requirement of 4-5 million tonnes,” he said.
To a question, Mr. Mukherjee said he was not thinking of raising the interest rates in the near future. Moreover, the action (of increasing interest rates) would fall under the Reserve Bank of India purview, which would albeit be taken in consultation with him.
The Minister predicted that given the steps taken by the RBI to raise the interest rates in April, there was no immediate possibility of the rates being hiked.
Initiatives such as increasing the Cash Reserve Ratio (CRR) from 5.75 to 6 per cent, and the short-term lending (repo) and borrowing (reverse repo) rates by 25 basis points each had helped to mop up the excess liquidity (Rs.12,500 crore) from the markets.
Mr. Mukherjee said he had increased the States' share of tax proceeds by 2 percentage points from 30 to 32 (to be in effect from the next fiscal) following the Central government's acceptance of the 13th Finance Commission's recommendations. As per this, 32 per cent of the last year's collection amount of Rs.6,40,000 crore would be given to the States from the Central tax kitty.
