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Assocham for unconventional measures to tame inflation

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Press Trust of India New Delhi

Industry body Assocham today said that the government should use unconventional instruments and refrain from hiking interest rates to curb inflation.

The reasons for bringing in new armours are the failure of the conventional measures like raising policy rates, which hardly have any direct bearing on the root cause of the price rise, it said.

"Conventional monetary measures do not directly address the cause of inflation, but rein in expectations of it spiralling out of control by attempting to compress demand," Assocham said without suggesting any measures.

The apex bank has increased the short-term lending and borrowing rates 10 times since March 2010 to tame the runaway inflation, which was over nine per cent in May. Food inflation was hovering around 8.96 per cent in mid-June.

"RBI's monetary policy has had little impact on food inflation which is largely shaped by imbalances between demand and supply. This calls for re-assessment of the government strategy to tame inflation," said Assocham Secretary General DS Rawat in a statement.

Barring some aberrations, Assocham said, commodity prices continue to harden with no signs of cooling down in the near future.

Since consumption of food is inelastic to price rises, the government's monetary policy had negligible impact on food inflation, he said.

 

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First Published: Jun 22 2011 | 5:24 PM IST

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