Tight monetary policy necessary to tame inflation: FM

Finance minister Pranab Mukherjee said monetary policy tightening was required to contain inflation in the context of the volatility of commodity prices, including energy prices and food prices in the international market

New Delhi: Supporting the Reserve Bank of India's (RBI) hawkish stance on the monetary policy, finance minister Pranab Mukherjee today said the increase in the key rates was necessary to contain inflation, reports PTI.

"This (rate hike) was necessary to contain inflation.

Inflationary pressure in the economy is still very high," Mr Mukherjee told reporters after the RBI announced its annual monetary policy for 2011-12.

The central bank increased the repo rate (short term lending rate) by 50 basis points (bps) to 7.25% to rein in inflation, which was almost 9% in March. It is a signal for banks to tighten interest rates.

The RBI has pegged the year-end inflation at 6% but cautioned that for the first half of the fiscal 2011-12, the rate of price rise would be in the range of 9%.

The finance minister said monetary policy tightening was required "to contain inflation in the context of the volatility of commodity prices, including energy prices and food prices in the international market."

On the issue of growth-inflation trade-off, RBI governor D Subbarao said, "High and persistent inflation undermines growth by creating uncertainty for investors and driving up inflation expectations."

Agreeing with Mr Subbarao, Mr Mukherjee said the economic growth for the current fiscal would be influenced by international commodity prices and monsoon rains.

"It would depend upon the energy prices and on the behaviour of good monsoon.... We are hoping that there will be good monsoon," the finance minister said.

On rising crude oil prices in the backdrop of political upheavals in Middle East and North Africa, Mr Mukherjee said "that uncertainty is still there."

The RBI's gross domestic product (GDP) projection is lower at 8% for the current fiscal while the government had pegged it at 9%.

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The old Times of India building near Churchgate



A very rare picture, it is a part of a fascinating collection of Mr Jayakar. A Parsi gentleman sold some voluminous scrapbooks to him about 15 years ago. These scrapbooks contain every conceivable bit of information on old Bombay. The gentleman pasted newspaper articles, ads, pictures, postcards, labels, etc, and wrote down all the information he could find on Bombay in the margin alongside. All the information is accurate, and there are obscure but interesting facts which are not found anywhere else—like the length of the Victoria Terminus station and its cost of construction. Mr Jayakar refers to these scrapbooks often. The only glitch is the gum used by the collector; he had pasted rare documents, maps, pictures, bank certificates, etc, directly on the paper; they are very difficult to remove now. As a result, many priceless documents have been ruined. Yet, Mr Jayakar thinks that it’s an extraordinary collection.

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Picture postcards of Bombay



Mr Jayakar is yet to come across another copy of this beautifully printed postcard (right) of Bombay that was printed in Italy and brought out by D Macropolo, a cigarette manufacturer in Calcutta. Mr Jayakar believes that it was printed around 1899 and was used in 1909. The colourful postcard depicts an elephant with a mahout in all its regalia, a view of the monkey temple in Kalbadevi (titled ‘Hindoo’ temple on the postcard) and a statue from the Ellora Caves. Mr Jayakar believes that it belongs to a set of at least six postcards, three of which he has. The series is titled ‘Greetings from Bombay’. He acquired these at an exhibition in London in 2010. The other three are yet to surface. Mr Jayakar has a large and an almost complete collection of picture postcards of Bombay.

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