Indian Finance Minister P. Chidambaram Friday promised to consider stronger measures to tame inflation which has hit a 13-year high of 11.05 percent.
Chidambaram said that a double digit rise in prices was anticipated when the government decided to increase fuel prices this month.
Petrol, diesel and LPG contributed to 94 per cent of increase in inflation for the week ended June 7 and this was expected, he said.
"When the administered prices of petrol, diesel and LPG were increased, we had cautioned the Cabinet that inflation would touch double digit and that is what has happened," he said, hoping that Indian people will understand "these are difficult times."
Within minutes of the release of the government data on inflation, the Indian stock benchmark Sensex plunged 516.70 points to closed Friday at 14,571.29 points, reflecting the nervousness of the investors about the efficacy of the measures being taken by the Indian Finance Ministry and the Reserve Bank of India.
"The government is aware of difficulties... Naturally, we will have to look at stronger measures on demand and monetary sides...We will try to address to the best of our abilities the demand and monetary sides and try to improve the supply side as well," said the minister
Chidambaram did not elaborate on what measures the government will take. But economists and bankers have warned that Reserve Bank of India may resort to further tightening of the monetary policy, a move that could lead to increase in lending rates for auto, housing and consumer loans.
The Indian government has come under acute criticism from the industry on the management of inflation with apex chambers saying that the situation appeared to have gone beyond the government's control and it has little scope of manoeuvring.
Meanwhile, Indian's Left parties on Friday accused the Indian government of failing to control inflation and asked the people to launch nationwide protests on the issue.
"This raging double inflation is going to have a disastrous effect on the living standards of people with the rampant increase in prices of all essential commodities. The Manmohan Singh government is squarely responsible for this dismal situation. It cannot escape by blaming global inflation," the Communist Party of India (M) said in a statement.
It is a direct result of the steep increase effected by the government in the prices of petrol, diesel and cooking gas." said the CPI(M). Similar reactions also came in from Left parties, according to NDTV.
Source: Xinhua
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