New Delhi, Aug. 19: Prime Minister Manmohan Singh is optimistic that inflation will be reined in within a month, sources close to him said.
The Prime Minister’s “optimism”, they said, was based on four factors: the monsoon which started to pick up in early August, a rise in food stocks, healthy foreign exchange reserves and fuel tax cuts.
“Unless there is a sudden and unexpected rise in fuel prices in the international market, the Prime Minister is reasonably sure that the surge will start tapering off,” one of the sources said. The trend reflected in the 7.6 per cent inflation figure — the highest in three-and-a-half years — is expected to continue for the next two weeks or so.
Keeping a beady eye on the price line, the Prime Minister and a crack team of finance minister P. Chidambaram, Planning Commission deputy chairperson Montek Singh Ahluwalia and RBI governor Y.V. Reddy are in constant touch with each other, the sources added.
Reddy, who was in the capital two days ago, had a two-hour meeting with the Prime Minister after calling on Chidambaram.
Chaired by Singh, the Cabinet Committee on Prices held its first meeting this evening. Asserting that there is no cause for “worry”, Chidambaram said after the meeting: “Let me assure you that there is ample supply of essential commodities.” He also promised more fiscal steps, if needed, to contain inflation.
In the management of the economy, Chidambaram is being described as the “administrative arm”, Ahluwalia the “ideas man” and Reddy the “controller of purse strings”.
The government feels that prices have gone up primarily because of the fluctuations in the monsoon, abundance of liquid cash in the market caused by the NDA government’s policy of easy loans and the surge in global fuel prices.
Inflation management is one of the areas Singh had specialised in at various stages of his career. As finance secretary and economic adviser to the government, he was faced with an inflation figure of over 20 per cent. In the early nineties, when he was finance minister, the figure was ruling around 10 per cent.
Sources claimed that the Prime Minister was not unduly worried about the fallout the BJP’s campaign on inflation could have on election-bound states like Maharashtra.
“Once the prices start falling, the BJP will have to accept the reality. Besides, what will matter in Maharashtra are local politics and caste equations,” a source said.
The expression of confidence comes at a time when a section of the Congress is worried that the party’s near-sweep of urban areas in the Lok Sabha polls could be difficult to repeat if the price rise is not arrested.