NEW DELHI: A day after the release of post-fuel price hike inflation figures at a 13-year-high of 11.05 per cent, the Congress-led UPA Government, in concert with the Reserve Bank of India, swung into the fire-fighting mode to devise fresh damage control measures not only to stem the price spiral but also quell all-round criticism on its “faulty” economic management.
In a joint strategy formulation effort in this regard, following Finance Minister P. Chidambaram’s hour-long meeting with Prime Minister Manmohan Singh on Friday, RBI Governor Y.V. Reddy on Saturday held discussions with both Dr. Singh and Mr. Chidambaram on the urgent measures needed to hold the price line.
The Finance Minister also had a meeting with Congress president Sonia Gandhi to apprise her of the reasons that led to the runaway increase in prices and the steps being contemplated to stem inflation.
It is evident that apart from yet another round of fiscal and administrative measures by the government, stringent policy steps by the RBI towards further monetary tightening are in the offing to douse inflationary expectations and thereby halt the runaway increase in prices, even at the risk of lower economic growth.
Immediately after his meeting with the RBI Governor, Mr. Chidambaram told newspersons that there should be no room for panic and assured further appropriate measures aimed at reining in inflation in tandem with the apex bank.
“We should not give room for panic. We should take steps to quell inflationary expectations...[and] that is precisely the course that the government has adopted in the past, and will adopt in future too,” he said.
Later, releasing a statement by Mr. Chidambaram on the inflation scenario at a press briefing here, Finance Secretary D. Subbarao said: “We expect the [RBI] Governor will take some action, but it is up to the Governor and the Reserve Bank to take monetary policy action. However, there are limits to managing the supply side. Much of the response has to be from demand side measures.”