Inflation control, therefore, is going to be on the top of the agenda of the policy for the second half of 1998-99. The policy will be announced on October 30. Measures to boost industrial production, reduce interest rates for exports and slow down the rate of expansion of broad money (M3) will also be high on the list of the Reserve Bank's priorities.

Therefore, there is unlikely to be any cut in the cash reserve ratio (CRR); in fact, the RBI may even increase it by one percentage point. The bank rate may also be hiked. The central bank is expected to introduce measures that will increase interest rates across the board to dampen the demand for money.

Messages have gone out from South Block and North Block to the RBI headquarters in Mumbaithat the BJP coalition government is worried about the rising inflation rate, which, if left unchecked, will soon enter double digits. Latest figures show that the inflation rate hit 8.69 per cent during the week ended September 26, 1998. This is the second-highest level in three years. The BJP coalition's economic mismanagement is evident from the fact that in the same period of 1997, the rate was only 3.47 per cent. When the coalition assumed power, it was hovering around 5 per cent.

While the wholesale price index-based inflation rate is worrying economists and policy-makers, consumer inflation, which crashed through the 15 per cent barrier and hit 15.04 per cent in August-end, is squeezing the common man. This has got politicians in jitters, and hence the SOS to the Reserve Bank.

The RBI, however, requires little prodding from New Delhi to swing into action in the war against rising prices. For decades, it has been an article of faith with the RBI that the primary task of monetary policy is moderateinflationary pressures. There are enough indications in recently-published documents of the Reserve Bank that inflation control will again be the focus.

The latest reiteration came in its annual report for 1997-98, released two months ago. The report said: "The objectives of monetary policy continue to be the pursuit of price stability and the need to ensure the availability of adequate credit for the productive sectors of the economy. The emphasis between these objective, however, depends on the specific circumstances in the year in question."

In 1997-98, the thrust was on adequate credit flow. This was because of the "distinct moderation in the inflation rate", which ruled between 3 per cent and 5 per cent. But things have changed in the current financial year. For instance, the RBI annual report said: "Since the beginning of the financial year 1998-99, there has been some evidence of excess liquidity in the system. M3 growth, which had recorded a high of 17.6 per cent in 1997-98, has been increasing ona year-on-year basis by 17.3 per cent as on July 31, 1998, as compared with the increase of 16.8 per cent in the correspondent period ended August 1, 1997."

The report added: "The overall monetary situation will have to be carefully watched and brought under control so that inflationary pressures are eased. There is no trade-off between growth and price stability in the short run."