Rising food prices will ease after July: Pranab Mukherjee

PATNA - Finance Minister Pranab Mukherjee has said that rising food prices would ease after July, and that he was not in favour of altering monetary policy.

The Reserve Bank of India (RBI) expects inflation to soften around mid-2010 on a normal monsoon and moderation in food prices and has forecast the March 2011 Wholesale Price Index (WPI) inflation at 5.5 percent.

“The food inflation is rising and the wholesale price index has also reached double digit figure and in the month of March it was 9.8 percent, now it has reached double digit. It will continue till the middle of July,” said Mukherjee.

“After July when the trend of monsoon will be well known, I think the inflationary pressure on the food items would (then) start coming down,” he added after meeting public sector banks chiefs here on Monday to take stock of bank’s performance on the Credit Deposit Ratio.

The unexpectedly high inflation has heightened expectations that the RBI would raise rates before its scheduled July review despite concerns over Europe’s debt crisis.

“On the monetary side, we have taken steps in the last monetary policy which was announced by the RBI which you have noticed that the basic rates have been increased by 25 basis points. CRR has been increased from 5.75 percent to 6 percent, REPO rate and reverse REPO rate, - both of these have increased by 25 basis points,” said Mukherjee.

“Therefore, through these exercises some excess liquidity has been mopped up from the market. But while taking the monetary policy, we shall have to keep in mind the legitimate credit requirement of the industry is not affected,” he added.

Chief Ministers of a few states, who have been raising concern over the poor credit deposit ratio, also attended the meeting.

Credit Deposit Ratio is the proportion of loan-assets created by banks from the deposits received. The higher the ratio, the higher the loan-assets created from deposits. (ANI)