New Delhi: Finance minister P Chidambaram said the government would take action in a "measured" way, both on the fiscal and the monetary fronts, to check inflation. He, however, warned manufacturers against pushing up commodity prices.

The Reserve Bank of India (RBI) governor YV Reddy called on Chidambaram yesterday morningfor an hour-long discussion on the monetary measures that could be considered to rein in the rising prices. The minister also had a detailed meeting with prime minister Manmohan Singh on the ministry''s plan of action.

The prime minister''s office had directed the finance ministry to prepare a detailed note on the rising inflation and its outlook, to be discussed in the Cabinet Committee on Economic Affairs meeting.

Briefing reporters after the meeting , Chidambaram said the RBI would take action according to its judgment on the monetary side and the finance ministry would take the necessary fiscal measures.

"Some manufacturers are pushing up prices taking advantage of the worldwide increase in commodity prices. I will advise them not to increase the prices. There is no justification whatsoever," Chidambaram said.

He said there was no reason for people to entertain inflationary expectations. "Monsoon has revived and seasonal factors will be ironed out. So, do not pay high prices if you feel the prices are high," the minister said. Besides statistical reasons, the rise in inflation was largely because of an increase in the prices of petroleum, Chidambaram said.

According to officials, the fiscal options being considered include a cut in Customs duty in specific commodities like edible oils, sugar, iron ore, steel and petroleum products, which have contributed to the rise in the wholesale price index (WPI)-based inflation.

The officials said a cut in the customs duty was favoured since it could be revenue neutral. "Higher imports could make up for the loss in revenue due to a duty cut," an official said.

While the option to cut excise duty was also considered, it did not find favour with the revenue department.

On the monetary front, the RBI could consider allowing the rupee to appreciate, the officials said. RBI deputy governor Rakesh Mohan discussed various monetary measures with chief economic adviser Ashok Lahiri.