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Govt may take risks to tame inflation, interest rates: FM

Last Updated: Monday, August 6, 2012 - 19:14

New Delhi: Ready to take "calibrated" risks, Finance Minister P Chidambaram Monday said the Government will work with RBI to control both inflation and interest rates to stimulate investment and ease burden on consumers.

Underscoring price stability, more importantly for the poor, he said the government will use its foodgrains stocks to moderate prices and enhance imports of essential commodities.

In his first media briefing after taking charge of the Finance Ministry, Chidambaram said fiscal and monetary policies must point to the same direction to moderate inflation. "The government will work with the Reserve Bank of India to ensure that inflation is moderated in the medium term.

"(Also) high interest rates inhibit the investors and are a burden on every class of borrowers, be it a manufacturer or a purchaser of home or two-wheeler or a student who takes an education loan".

The Finance Minister who met RBI Governor D Subbarao this morning, said "sometimes it is necessary to take carefully calibrated risks in order to stimulate investment and to ease the burden on consumers. We will take appropriate steps in this regard".

Subbarao has been maintaining that the inflation needs to remain the top priority for the RBI. The central bank did not reduce the benchmark interest rates in its first quarter credit policy review despite pressure from the industry.

The wholesale inflation in June was 7.25 percent, while at the retail level it was 10.02 percent.

Industrial production recorded a dismal growth of 2.4 percent in May and the overall economic growth slowed to nine-year low of 6.5 percent in 2011-12.

In the backdrop of monsoon deficiency, Planning Commission Deputy Chairman Montek Singh Ahluwalia has lowered the economic growth projections to about six percent in 2012-13.


First Published: Monday, August 6, 2012 - 19:14
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