Finance Minister P Chidambaram on Thursday expressed optimism that fuel prices cut would have a moderating impact on inflation. He said the UPA Government tamed inflation when it reached over eight per cent in 2004-05 and would do this time as well.
Inflation, touched a high of 8.7 per cent on August 26, 2006, a few months after the UPA Government assumed the office. However, the following year inflation peaked at six per cent with average standing at 4.4 per cent.
Inflation is also rising partly due to high growth rate of the economy. In fact, Commerce and Industry Minister Kamal Nath recently said that in a rapidly growing economy some price rise was expected, but added that the current rate of inflation had gone beyond acceptable levels.
Industry chambers also echoed similar sentiments and said the price rise was not across the board and in fact inevitable for the growing Indian economy. The price rise is limited to select items like food, which reflects certain bottlenecks on the supply side, they said.
Chidambaram had earlier admitted that at the current rate of growing economy, inflation is tolerable at four per cent. “Our aim is to bring down inflation below five per cent and move toward four per cent,” he had said.