Finance Minister P Chidambaram indicated today that Reserve Bank of India (RBI) may not cut interest rates to boost industrial production because of high inflation.
"As long as there is a threat of inflation, you have to trust RBI to use policy rates to contain inflation and dampen inflationary expectations," Finance Minister P Chidambaram said at an India Today Conclave in response to a query whether there will be rate cuts to give a fillip to sagging industrial growth.
Chidambaram, however, said determination of interest rates is under the domain of the RBI.
He attributed high inflation to rising prices of food and commodity prices in the world saying India is not entirely insulated from the global trends.
Citing examples, he said global crude oil price surged to $110 per barrel yesterday from $37 per barrel when the UPA government came to power. Similarly, global prices of palm oil that India imports rose to $1,270 per metric tonne from $471 per metric tonne.
"We have recognised that there is a slowdown, thanks to the US impending recession. We have applied tax book economic approach to boost consumer demand by putting more money in the hands of tax payers, cutting excise and customs duties and enlarging public expenditure," Chidambaram said.
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