Govt will keep inflation moderate: Chidambaram

Finance Minister P Chidambaram Monday said the government and the Reserve Bank will take steps to keep inflation moderate and to foster economic growth.

"We will continue to watch the price line. If necessary, we will take monetary and fiscal steps (to check inflation). Let's see what the RBI does Tuesday. Then we will take fiscal steps, if necessary," Chidambaram said on the sidelines of an award ceremony organised by the United Nations Development Programme and the Rajiv Gandhi Foundation.

The finance minister said the government and the RBI expected inflation to be around 5% despite the rise in domestic fuel prices and its "pass through" impact on prices of other commodities.

"There is bound to be some impact of fuel price hike on inflation. The price rise was inevitable. I think the fuel pass through impact is over," he said.

Inflation rose to 4.62% for the week-ended October 8 against 4.24% in the previous week due to higher prices of essential food items and manufactured products.

Chidambaram said in a developing economy like India, there was bound to be some inflation. But it was for the government and the RBI to keep it moderate and ensure that the growth momentum was not hampered. The minister said he did not see pressure on the interest rates.

"Bankers told me that interest rates will remain stable in short to medium term," he said. Chidambaram emphasised on growth with equity to reduce poverty. "With growth, there is a chance of equity. Without growth, there is no chance. Growth is an imperative," he said adding, that equity was a political choice.

"Ultimately, a programme with an eye on outcomes can uplift the poor," he said.