June 22, 2008	Sunday	Jamadi-us-Sani 17, 1429

NEW DELHI, June 21: India’s finance minister warned on Saturday against “panic” and promised more measures to tame prices, a day after the country’s inflation rate shot to a 13-year high.

We should not give room for panic. We should take steps to quell inflationary expectations, said Finance Minister Palaniappan Chidambaram after meeting the head of India’s central bank to discuss steps to tame inflation.

Data on Friday showed annual inflation in the world’s second fastest-growing economy jumped to 11.05 per cent for the week ended June 7 from 8.75 per cent a week earlier, stunning economists who had expected it to be in single digits.

The rate, which sparked headlines in Saturday’s newspapers such as “Double-digit shock” and “It Hurts!”, was driven by a sharp rise in state-set fuel prices and rises in basic foods.

We expect the RBI (Reserve Bank of India) to take some monetary measures, Finance Secretary D. Subba Rao told reporters separately in the capital.

Demand management has to be part of the solution and the first line of defence is monetary policy action, Rao said, without elaborating.

Rao said the government was sticking with its economic growth forecast of 8.5 per cent for the current fiscal year to March 2009, down slightly from last year’s 9.0 percent, for the timebeing.

But he said if it came to a trade-off between taming inflation and boosting growth, priority would be given to checking prices, which is seen as hitting India’s poor the hardest.

Some economists believe growth could be as low as seven percent in this fiscal year.

Analysts say the Congress-led government had little left in its fiscal arsenal to fight inflation -- it has already banned exports of staple foods to boost supplies and lower prices. India is also a victim of global forces with international commodity prices surging and oil costs doubling in the past year.

The latest price rise has come as a heavy blow to the government which desperately wants to curb prices, fearing a voter backlash in national elections due by May 2009.

Rao said RBI Governor Y.V. Reddy held “detailed discussions” with Chidambaram and later met Prime Minister Manmohan Singh, who was finance minister in a previous Congress government when inflation was last at double-digit levels in 1995.

Several economists have forecast that a half point rise in the central bank’s leading short-term lending rate, the repo, along with other aggressive credit-tightening measures — possibly within a few days.—AFP