Fighting inflation: Need to avoid drastic knee-jerks, cautions PM

In a meeting with Finance Minister P Chidambaram and Deputy Chairman Planning Commission Montek Singh Ahluwalia this morning, Singh is believed to have said that high Inflation was largely due to rising global crude Oil and commodity prices. An official, present in the meeting, said, “The PM said the government cannot be seen to be over-reacting.”

With the wholesale price index-based inflation rate rising continuously since February to creep towards 8 per cent now, the government has been taking various fiscal and administrative decisions, some of which, economists feel, go against the grain of a liberalising economy. Price controls, export bans and restriction on commodities futures trading are being seen by some in the government as knee-jerk reactions.

According to officials, the Prime Minister said that record wheat procurement of 20 lakh tonnes and a good monsoon forecast would help keep food prices low in the coming months. Further, he was of the opinion that given the steps — fiscal, administrative and monetary — already taken, the government must now ride the storm. Clearly, the PM’s message was not to panic each time inflation figures were released.

When contacted, Montek Singh Ahluwalia told The Indian Express that steps such as banning futures trading had little to do with inflation. “Personally, I do not think that measures such as invoking the Essential Commodities Act work,” he said, adding that a slew of measures already taken would yield the desired results.

Rising prices, especially with general elections just a year ahead, is a...