Recent steps to check inflation futile: CPI(M)

The CPI(M) wants the UPA government to take a "serious look" at its recent "monetary package" to control inflation. The package included a reduction in the cash reserve ratio and an increase in the reverse repo rate.

The recent increase in the rate of interest will make access to capital difficult, which will result in a low investment rate and consequent unemployment, CPI(M) Politburo member and MP Sitaram Yechury has said.

"By taking these measures, the government is pushing the economy to a downward slide. We have already conveyed to the government that it needs to have a re-look at the monetary measures undertaken recently to contain inflation," he said.

Questioning the government's diagnosis about inflation being related to increased liquidity, the CPI(M) leader said the real reason was an increase in the prices of essential commodities and the need of the hour was to ban futures trading in these commodities.

Meanwhile, the Left is set to stonewall insurance sector reforms, a blueprint of which was presented by Finance Minister P Chidambaram yesterday.

Yechury today said his party remained opposed to increase in FDI limit in the insurance sector from 26 per cent to 49 per cent.

"Under the present conditions, it is not advisable to increase the FDI cap. Insurance sector collates and collects personal savings in India. With its huge resources, it is the biggest financer of our development projects. The larger the FDI, the larger the outflow of our resources outside the country," said Yechury.

"If there is a boom in the insurance sector, why are the domestic investors not investing? The argument that Indian companies are not interested in long-term ventures does not hold water. What is the guarantee that foreign investors will show interest in long-term investment? Deployment of our savings outside the country is of concern to us," he said.

Asked if the Left parties would reconsider the issue if there were regulations to check the outflow of money, Yechury said, "If the outflow is regulated, what is the need to increase the FDI cap? Even without increase in the cap, they (foreign companies) can invest in the sector. There is tremendous pressure from international financial capital for opportunities to mobilise our savings. The government should not fall under this pressure."