Shan’s Blog

As inflation hovers at around 6 percent, Finance Minister P Chidambaram has said the government is committed to moderating it with additional measures that would take some time to bring down prices.
“Government is committed to moderating inflation though it may take some time to contain it,” he told reporters after the Cabinet meeting.

He said prices of various commodities have come down after fiscal measures taken by the government and RBI’s decision to raise repo rate and increased provisioning for certain sectors.

Claiming that the average inflation during the UPA regime has been much lower in comparison to the NDA regime, Chidambaram said the government was taking necessary steps from time to time.

When asked whether the government could take additional steps before the Budget to contain inflation, Chidamabaram said, “Government will take steps as and when required,” adding public sector banks have been asked by the government to hold interest on housing loans at the current rate.

“The sugar prices have come down by about Rs 2 a kg, while wheat prices have stabilised during the past 3-4 days,” he said adding that the Ministry of Agriculture is taking steps to address the supply issues of food commodities.

Government has brought down customs duty on essential commodities, including edible oil, cement and maize, he said.

The wholesale price index based inflation touched 6.11 percent for the week ending 20th January, while the price of essential commodities, including vegetables, fruits, milk and spices have gone up by 7 to 38 percent over the past one year.

The private banks have also raised interest rate on housing loans, car and other retail loans by up to one per cent, after RBI’s decision to raise short term overnight lending and tightening of norms for these sectors on 31st January.

Referring to role of speculators in the housing sector, he said, “The demand for housing is too high that housing loans are growing at 45 percent annually… Public sector banks have reported that 99 percent borrowers are genuine customers.”

On private sector banks raising interest rate on housing loans, he said, “Private banks are private banks.”

Public sector banks would continue to provide credit to the housing sector, but government could not do anything with regard to interest rate hiked by the private banks, he added.

With interest rates on fixed deposits showing a rise, the government remained non-committal on revising the Employee Provident Fund (EPF) rate.

“Government will take appropriate decision (on it)”Chidambaram said.

The Finance Minister was replying to a question on the Labour Minister Oscar Fernandes’ request to Employees Provident Fund Organisation (EPRO) to revise the interest rate, which now stood at 8.5 percent.

Fernandes, is the ex-official Chairman of the Central Board of Trustees of EPF.

At its meeting on 27th January, the EPF board failed to arrive at a decision on the interest rate for the current fiscal for its 4 crore subscribers.