Expect Tax Cuts : FM Hints

Finance Minister P Chidambaram on Saturday said that the government is willing to take more fiscal steps including the possibility of deeper tax cuts to bring down inflation.

He also said that India should not give room for panic and the government will provide enough wheat and rice to bring down prices.

After inflation hit a 13-year high of 11.05 per cent on Friday, there is more bad news for consumers, as the government admits it will not come down significantly before next year.

The RBI may soon announce monetary measures to check price rise, Finance Secretary D. Subbarao said in New Delhi. At the same time, he predicted that inflation would remain high for the next three months.

"The first line of defence for inflation is monetary measures," Subbarao said. “As we cannot control the supply side, we require quick measures to control the demand side, which will be done by the RBI by taking monetary policy action.”

Asked about measures the RBI may possibly take, Subbarao said: “I can't speak for the RBI, but we all know what measures the central bank is likely to take,” referring to a possible hike in interest rates.

“The double-digit inflation is certainly quite disturbing and inflation management is the top priority of the government,” the finance secretary said.

He also said inflationary pressure would continue for the next three months. This was on account of the global crude oil crisis that has contributed 94 per cent to the high rate of inflation, he added.

Subbarao said: “India will continue to maintain GDP growth of 8.5 per cent and see inflation at 5 to 6 per cent in a year from now.”

Asked about administered price increase, the finance secretary said: “That is a political decision and the government will take a decision on it.”

The price of non-oil products is falling on month on month basis, the finance secretary pointed out.

(With IANS inputs)