Mukherjee calls for global efforts to control inflation

Hanoi, May 5 (ANI): Finance Minister Pranab Mukherjee on Thursday called for a coordinated effort at the global level to control inflation.

Speaking at the Asian Development Bank annual meeting at Hanoi, Mukherjee said: "We need to look closely at contribution of different factors to food price volatility and inflation, in order to understand and respond through policy reform."

"Since a significant part of inflation is due to imbalances and inadequacies in global financial and monetary management, one set of policies needs to address issues such as excessive liquidity and speculation and another set of policies need to address other issues of a transitory nature such as drought and floods in major producing countries, panic buying, exchange rate fluctuations," he added.

Mukherjee also warned that volatility in international food and fuel prices may be on the way to becoming a long term and global phenomenon.

"Before the onset of global crisis, we faced food and fuel price volatility. During the global crisis of 2008-09, with collapse of demand, we experienced a broad flattening of prices. And, as the world experienced recovery from the crisis, different parts of the world faced highly differentiated recovery and inflationary conditions," said Mukherjee.

"Till about a few months ago, the slow recovering advanced economies, with few exceptions, still faced low inflationary conditions, while fast recovering emerging economies faced higher inflation," he added.

He further said that this highly differentiated recovery and inflationary conditions threw up several challenges in global economic cooperation and the rebalancing exercise.

"Today the entire globe is facing a simultaneous volatility in food, fuel prices and commodity prices. Thus, over the last four years, we have moved from a fuel crisis to a food crisis to a financial and economic crisis and now, we are back to a food and fuel price crisis," he added.

" India is grappling with high food inflation, which was hovering around 8.5 percent for the week ended April 23 and the Reserve Bank of India has tightened the monetary policy to contain inflation even at the cost of economic growth," he added.

Mukherjee further said that a significant part of inflation is due to imbalances and inadequacies in global financial and monetary management.

On capital flows, Mukherjee said there has been steady revival of capital flows to India in 2009-10 and this trend continued in 2010-11 due to its strong economic fundamentals.

"Both national and international factors have been responsible for the surge in capital flows. Strong economic fundamentals i.e. high growth rate, macroeconomic stability, stable policy regime and good governance are some of the domestic factors attracting capital flows to India," said Mukherjee.

"However, easy monetary policy in terms of very low interest rates and quantitative easing in advanced economies have led to increase in liquidity and lowering of long-term interest rates. These are also driving capital to emerging economies in search of higher yields," he added. (ANI)