Govt’s fiscal recipe for inflation soon

The Government has been concerned at the inflation rate, which touched a two-year high of 7.51 per cent when the data for July 17-24 were released last week. This led to a chain of events with the PM and the FM meeting to discuss measures to tackle the issue, followed by meetings between the FM and the RBI top brass later. Chidambaram had announced that monetary measures would be taken by the RBI while his Ministry would announce fiscal steps.

According to sources, the increased money supply last year — which grew by 16.6 per cent instead of the targeted 14 per cent — is mainly responsible for the spurt in inflation. The oil price hike in the global markets and seasonal variations owing to a delayed monsoon were other factors that contributed to it.

With countries like China buying huge quantities of steel and other commodities in the international market, commodity prices have hardened globally, also affecting the Indian market.