Chidambaram blamed inflation on the continuing increase of global crude oil prices. This crude oil price determines most parts of inflation. Unless there is decline in crude oil prices it is difficult to reduce prices, he said. The minister added that there was still scope for cement makers to cut prices. With crude prices touching an all-time high of $135 a barrel on May 22, the government is mulling a hike in retail fuel prices.
Speaking at an Assocham event on Friday afternoon, the finance minister reiterated, Today crude oil determined all prices. Movement of virtually every commodity (prices) is in sync with the movement of crude oil prices.
Food prices are also getting linked to the fuel prices, he said as food is being diverted by developed countries towards production of bio-fuels. Chidambaram said the government could neither control crude prices nor persuade developed nations to stop using food to produce bio-fuels.
Democracies, dictatorships, monarchies, right wing governments; all of them have joined hands to raise oil prices, the finance minister said, while urging the industry to hold the price line and advising people to be patient.
Even as it struggles to battle high inflation, the government got some relief from a joint report of the Organisation for Economic Cooperation and Development (OECD) and Food and Agriculture Organisation (FAO) said that India fared better in managing food inflation compared to many other developing countries in 2007-08. However, the report said India s food inflation still remains higher than the developed countries like the US and Japan during the review period.
The report said prices of food items rose by 5.8% in India, the lowest increase among 15 developing countries for the period ending February 2007-08. Food prices showed the highest increase at 25.6% in Sri Lanka , followed by Kenya at 24.6% and China 23.3%, the report entitled Agriculture Outlook 2008 said. A record foodgrain production estimates at 227.32 million tons during 2007-08, against 217.28 million tons last year has helped India keep food inflation under control, experts said.
The government has come out with several measures to rein in inflation since the March 31 decision of the Cabinet Committee on Prices to slash import duty on edibles oils and ban export of non-basmati rice to contain inflation.
NR Bhanumurthy, associate professor, Institute of Economic Growth , New Delhi , said : Only after June can we expect the impact of the fiscal measures taken by the government to be seen on the inflation rates. But if crude oil prices go up further, and it seems likely to rise, then again it will push up inflation further. It looks like we need to live with high inflation for a while now. However, it is unlikely to cross 9% in this fiscal.
There is nothing much the government can do at this stages, except may be remove export incentives to boost the domestic supply, he said.