FM vows to rein in prices, says there146;s no short-term solution

Maintaining that the rise in inflation, which hit a two-year high of 6.58 per cent on Friday, is due to strong economic growth...

Maintaining that the rise in inflation, which hit a two-year high of 6.58 per cent on Friday, is due to strong economic growth, finance minister P Chidambaram on Saturday vowed to control soaring prices using all possible measures. He added that the government would ensure the macro-economic stability while taking steps to achieve this end.

8220;We have an unusual combination of factors at play. GDP growth is healthy at 9 per cent, credit offtake has grown over 30 per cent and money supply has increased 21 per cent. But the government is determined to take all steps to curb inflation. We have done it before and we are confident of doing it again,8221; the Finance Minister said.

Chidambaram, however, made it clear that there was no short-term solution to supply side bottlenecks in checking prices.

Addressing a conference of the Association of NSE Members of India ANMI here, the finance minister called upon various market intermediaries to work together for consolidation in the segment. 8220;A very large of number of intermediaries increases the cost of regulation. I urge ANMI, NSE and Sebi to consider the possibility of incentivising consolidation of market participants,8221; he said.

8220;We need a well-designed system of disclosures in the market. There is also a need for self-regulation at the first level and statutory regulation at the next. However, the formation of self-regulatory organisations is yet to commence,8221; the finance minister said.

Chidambaram added, 8220;We need to advance the level of investor protection and impart financial literacy skills at an early stage. We will come up with a financial literacy package, free of cost, for schools and colleges.8221; An investor protection fund is also being set up under the Sebi Act, he added.

On the absence of retail investors from the market, Chidambaram said, 8220;They have the money to invest, but need to have confidence in the market.8221; The safety of their investment and risk management systems are important in this context, he said.

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The finance minister said investor protection was the surest way to attract small investors to the capital market. 8220;Only a small portion of household savings get into the market. Once investors are confident about the safety of their investment, more money will flow in,8221; he said.

On the challenges ahead, Chidambaram said that the markets would have to live with volatility and external factors like global interest rate movements.

8220;Another concern is whether the global asset prices will continue to boom or not,8221; he added.