High inflation not due to monetary expansion by RBI: Pranab

The Centre today said high inflation is not because of monetary expansion undertaken by the Reserve Bank of India (RBI) earlier to push up the economy, but due to shortage of supply in food items and high procurement prices of cereals.

"If, you look at the current trend in the inflationary pressure, it is not because of substantial monetary expansion but because of supply bottlenecks in respect of certain essential commodities particularly the food items," finance minister Pranab Mukerjee told reporters after a post-budget meeting with the RBI board.

He added that the contribution of the other items to inflation is not as high as food items.

"It (food inflation) reached as high as 19.9%. Gradually, it is coming down. Substantially, it (high food inflation) is because of the short supply in edible oil, pulses and sugar," Mukherjee said.

He said supply of cereal is adequate, but their prices increased because remunerative procurement prices led to rise in retail prices as well.

The finance minister said the RBI has assured him that like last fiscal, the government's borrowing programme in the next fiscal will also be undertaken in a way that the resources for private sector does not dry up.

He said the goal of fiscal consolidation and high growth are not contradictory approaches and he would like to see high 9% growth as soon as possible.

Mukherjee also said that whenever there is a proposal for banking consolidation, it should be considered in consultation with the RBI.