After having raised its key policy rates 10 times in a year-and-a-half to check inflation which remains stubborn, the Reserve Bank of India (RBI) today said it had no magic wand to bring down the rate of price rise.
"You all want that inflation should come down. Neither the Finance Ministry nor the Reserve Bank has any magic wand to bring down inflation," RBI Deputy Governor KC Chakrabarty said at an Assocham meet here.
Inflation, as measured by the Wholesale Price Index (WPI), was over 9% in May.
Despite RBI's monetary policy tightening regime and steps of the government, inflation continues to remain high.
The central bank has projected inflation to be at around 6% by March 2012.
The deputy governor said the current inflation was because of constraints in the supply chain and only increase in agricultural productivity and use of modern technology could check the rate of price rise.
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"Instead of saying that RBI should bring down inflation, we must increase productivity and bring down the cost of services and that will only bring down inflation. Otherwise, it will not come down," he said.
Earlier, at the same event, Finance Minister Pranab Mukherjee said in the short-term moderating aggregate demand was critical to check inflation, which is "our major challenge".
He, however, admitted that anti-inflation monetary measures may impact growth.
The RBI has been increasing key policy rates since March 2010 and the latest was yesterday's 25 basis points hike in short-term lending and borrowing rates.
Inflationary pressures persist from both higher global commodity prices and domestic structural demand-supply imbalances in several commodities.