Addressing supply side issues must for taming inflation : RBI
Last Updated : 26 May 2011
Seeking cooperation of states in containing price rise, the RBI has said efforts are needed to improve farm productivity, develop rural infrastructure and revamp PDS to address supply side issues and contain inflation.
"....They (states) could for instance, help better management of Public Distribution System (PDS) and improve productivity in agriculture and allied activities. There is also need for reform in the Agriculture Produce Marketing Committee (APMC) Acts among other measures," RBI governor D. Subbarao said while speaking at 24th Conference of the State Financial Secretaries in Mumbai.
The Government data released on 17th May showed a minor dip in headline inflation to 8.66 per cent in April, driven by a moderation in food and manufactured items prices.
On market borrowings, Subbarao said," there was a need to improve efficiency in terms of better planning, robust cash management and adherence to the Fiscal Responsibility Legislation( FRL)".
Besides improving revenue collection through tax reforms, the states should also focus on expenditure management, he added.
Subbarao also referred to implementation of Malegam Committee report in the context of regulating micro finance institutions (MFIs).
"The unincorporated MFI's would be regulated by the proposed central legislation uniformly across the states and the incorporated MFI's by the Reserve Bank".
The Malegam panel was set up by the RBI to study the MFI business in the country following a spate of suicides in Andhra Pradesh due to harassment by loan recovery agents.
Making a case for improving the effectiveness of the State Level Bankers Committee (SLBC), the Governor urged the state governments to play a proactive role in the field of financial literacy and financial inclusion in collaboration with the Reserve Bank.
Finance Secretaries of 18 states along with the Planning Commission Member Secretary Sudha Pillai, Chief Economic Advisor to the Finance Ministry Kaushik Basu, among others, participated in the conference. (ddi news)