Date:05/03/2008 URL: http://www.thehindu.com/2008/03/05/stories/2008030560021300.htm

National

“We will have to do a balancing job”

Special Correspondent

Inflation up due to demand-supply mismatch, says Chidambaram

NEW DELHI: Finance Minister P. Chidambaram on Tuesday attributed the rise in inflation rate to the mismatch between the demand and supply owing to stagnation in cereals and pulses production.

Replying to a supplementary raised by Murli Manohar Joshi (BJP) during question hour, Mr. Chidambaram said the present rate of inflation was 4.5 per cent but the government would take measures to bring it down nearly 4 per cent.

“The government will carefully watch the situation and take monetary measures. But there is a flip side to it and that is the rise in interest rates. The government will have to do a balancing job.”

The production of wheat, rice and pulses stagnated over the past few years even as demand rose.

Besides, the price of wheat in the international market rose by 88 per cent and that of rice by 15 per cent since April last.

Also, the minimum support prices (MSP) paid to farmers had increased in the past three years. All these led to some pressure on prices.

Food security mission

The government had allocated Rs. 25,000 crore for the Rashtriya Kisan Vikas Yojana and over Rs. 4,000 crore for the National Food Security Mission to raise the production and productivity of wheat, rice and pulses.

Mr. Chidambaram said the international prices of crude oil, metals and edible oil were not in control of the government and as long as the nation was dependent on imports to meet its requirement it would not be insulated from global prices.

“If we can be self-sufficient in food we can be insulated from world prices. To the extent we are dependent on imports, we are not insulated from world prices.”