As retail inflation crossed the double-digit mark, Finance Minister P Chidambaram today said the government is looking at various suggestions to cool prices but there were no easy answers to the problem.
"Both RBI and the government are trying number of measures to cool inflation... We are looking at various suggestion that we have got. I am open to suggestion but I am afraid that there is no easy answers to cool retail inflation," he said while addressing investors here.
The CPI inflation, measured by movement in the retail prices of food items, soared to a seven-month high of 10.09% in October. The wholesale price-based inflation too shot up to 8-month high of 7% in the same month. He attributed the rising inflation to the high fiscal deficit incurred by the government to neutralise the impact of global financial meltdown of 2008.
The Minister further said although the government had offloaded 5 lakh tones of wheat to contain price rise, it would not cool prices of fruit, vegetable, milk and eggs. Chidambaram said his foremost priority would be to contain fiscal deficit and Current Account Deficit (CAD). The fiscal deficit in the current financial year, he added, would be brought down to 4.8% of the GDP, from 4.9% in 2012-13.
As regards the CAD, the Minister said he would endeavour to bring it down to below USD 56 billion, a figure which was given by RBI Governor Raghuram Rajan yesterday. CAD soared to a record high of USD 88.2 billion or 4.8% of the GDP in 2012-13.
Government had initially proposed to bring CAD down to USD 70 billion. Later it improved the estimates in view of declining gold imports and rising exports. "... the trough that we hit in the first quarter of 2013-14, is clearly a direct result of high fiscal deficit, a very high CAD, and inflation which is stubborn, high and unacceptable. We need to deal with them, we cannot wish them away. There are no easy answers," Chidambaram said.
The problem of inflation remains, he said, adding that there are three numbers to look at, which are core inflation, WPI and retail inflation. "The RBI has a mandate. The mandate is to control inflation without killing growth. Monetary policy does not have impact on food inflation, I am sure (RBI) Governor also knows that," he said.
The Minister said WPI inflation between 6 and 7%, is "high, worrisome but something that can be addressed". "There are no easy answers to that (retail inflation). Demand obviously is very high. There is not enough production of fruit, vegetable milk or eggs.... inflation remains stubborn."
To contain spiralling inflation, RBI has hiked policy rates by 0.25% in its last monetary policy on October 29.
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