Price rise: PM to meet RBI governor today

After meeting his senior cabinet colleagues for the second day on measures to tackle the headline food inflation, Prime Minister Manmohan Singh is likely to hold discussions with Reserve Bank of India governor D Subbarao later today on the possibility of further monetary steps to check price rise.

Worried over the inflation – at 18.32 per cent on 25 December – and particularly the skyrocketing prices of onions, other vegetables and milk, the prime minister met senior Cabinet colleagues earlier in the day to work out a strategy to deal with rising inflation.

Singh's meeting with Subbarao comes ahead of RBI's quarterly review of monetary policy on 25 January.

The Reserve Bank has already raised the short-term key borrowing and lending rates six times in 2010 in a bid to raise cost of funds and check inflationary expectations. Although the RBI action pushed up the lending and deposit rates of banks, the impact has not been really visible in the case of food inflation.

Experts were of the opinion the central bank could hike key policy interest rates (repo and reverse repo rates) by at least 25 basis points in its monetary review.

Experts also feel that overall inflation for December would be over 8 per cent as compared to 7.48 per cent in November. The figures for December are scheduled to be announced later this week.

The prime minister's meeting today was attended by finance minister Pranab Mukherjee, agriculture, food and consumer affairs minister Sharad Pawar, home minister P Chidambaram, and Planning Commission deputy chairman Montek Singh Alhuwalia.

Although it took stock of several medium and long-term possibilities, the meeting apparently remained inconclusive.

Among the measures reportedly discussed were asking states to reduce their APMC and inter-state transport taxes until March, drafting a plan to encourage vegetable cultivation in semi-urban and areas around the major cities and towns, embarking on a major fodder production programme to enhance milk production, reducing skimmed milk powder import duty to zero, monitoring local sugar prices, and subsidising onion distribution and imports.