Supply factors driving inflation, says Pranab

[caption id=“attachment_119754” align=“alignleft” width=“380” caption=“Finance Minister Pranab Mukherjee. PTI”] [/caption]

Inflationary pressures in India are being driven by supply-side factors, Finance Minister Pranab Mukherjee said on Monday, adding he expects inflation to moderate from December.

India’s headline inflation has topped 9 percent for nearly a year, prompting its central bank last week to lift its policy lending rate for the 13th time since March 2010.

He added that inflation will start easing soon as the government’s efforts to remove supply-side bottlenecks have started yielding results.

“The current inflation pressures are mainly because of supply-side constraints of agricultural products. Necessary steps have already been taken. I hope it will have its impactand from November-December onward… the rate of inflation will be moderating,” Mukherjee told reporters.

Food inflation shot up to 11.43 percent during the week ended October 15 on the back of costlier vegetables and fruits.

Headline inflation, which also factors in manufactured items, has been above the 9 percent-mark since December, 2010. It was 9.72 percent in September this year.

On the RBI’s decision last week to raise key policy rates for the 13th time since March, 2010, to tame the rate of price rise, Mukherjee said, “There was some liquidity excess which was required to be mopped up and through the adjustment of interest rates, efforts have been made to mop it up.”

Following the global financial crisis in 2008, several governments across the globe have provided a stimulus to boost their economies, resulting in excess liquidity in the system.

In order to check inflation, the RBI raised the short-term lending and borrowing rates by 25 basis points to 7.5 percent and 8.5 percent, respectively, on Tuesday.

Agencies