Free food movement will help curb inflation: FM's adviser

Free food movement will help curb inflation: FM's adviser
28 May, 2008.

NEW DELHI: As inflation tests new highs, the Finance Minister's
adviser today suggested easing restrictions on movement of food items
within the country, while calling any hike in interest rates to cool
price rise a bad idea.

"Inflation rate is higher than what we want it to be... and raising
interest rate is not the best way to curb inflation," Finance
Minister's adviser Subhashish Gangopadhyay said at a panel discussion
held by chamber PHDCCI here.

He said the food inflation was on account of domestic reasons, arising
from restrictions on movement of goods.

"We have too many constraints on food movement," he said, adding that
global factors were only driving up prices of fuel and primary
articles.

Inflation for the week ended May 10 stood at a 44-month high of 7.82
per cent, as prices of industrial fuel such as naphtha and jet fuel
went up. The only relief was that wheat procurement has touched a
record 20.7 MT so far this year.

Gangopadhyay was emphatic that any anti-inflationary measure that
hurts investment was not a good thing and in this context, felt that
raising interest rates would have serious implications for the
economy, "especially when we are aiming for high growth."

Reserve Bank has, this year, twice raised the percentage of cash that
banks must keep in reserve to suck out excess liquidity from the
banking system - a move aimed at tempering demand for loans and in
turn to cool consumption.

Although government has unleashed several measures such as banning
export of non-basmati rice, slashing import duty on edible oils and
goading steel and cement makers to hold prices to help contain
inflation, many expect the Reserve Bank to take additional monetary
measures to complement the government's efforts