Special Correspondent

NEW DELHI: The Government would attempt to ease supply side pressures that were leading to inflation through a more liberal import and fiscal regime. "Prices are rising because supply has not kept pace with demand in a rapidly growing economy. We are trying to see where these supply gaps are coming from. If the need arises, imports will be made more flexible," Commerce and Industry Minister Kamal Nath said here on Thursday.

Though he accepted that inflation had gone beyond expectations, Mr. Nath did not agree that the higher rate recorded in recent times indicated overheating of the economy. The cuts in prices of diesel and petrol were the latest tools to reduce the inflation rate. They were preceded by a ban on wheat and milk export and freer import of maize.

Asking the manufacturers to keep prices under control, Mr. Nath said the Industry Ministry had identified cement, metals and paper as some of the products that were behind the rise of inflation. Some steps were taken in the case of cement and the Government was considering further easing of import of ferrous and non-ferrous metals.