Cabinet wars: Sharma opposes interest hike

In what seems another indication that there is no cohesive purpose in the union cabinet, commerce and industries minister Anand Sharma today criticised the Reserve Bank of India's expected move to further tighten monetary policy in its 25 January review.

In a public letter to finance minister Pranab Mukherjee, Sharma said raising interest rates may not be a ''suitable tool'' to control the raging food price inflation, but would instead slow down industrial growth. Mukherjee has been tacitly backing RBI's intent to hike key rates.

Making out a strong case for easy finance to industry, Sharma said that industrial growth has already plunged to an 18-month low of 2.7 per cent in November 2010.

''The high inflation in primary articles, particularly vegetables, is more on account of supply side constraints, and monetary policy may not be the most suitable intervention to deal with the situation,'' he said.

The minister said that while he appreciated concerns on inflation, ''the industrial sector clearly needs sustained support to enable complete recovery''.

Food inflation stood at a high level of 16.91 per cent in the first week of January, after touching 18.32 per cent in the last week of December 2010.