RBI asks states to address supply side issues

Mumbai: Ahead of mid-quarter monetary policy review, Reserve Bank Governor D Subbarao today asked state governments to address the issue of supply side bottlenecks against the backdrop of rise in prices. Addressing state finance secretaries here, he said both the centre and the states have important role in generating and promoting the supply response so that inflation could be managed within the comfortable zone.

The governor urged them "to continue introducing supply enhancing measures, including management of public distribution system, and steps to improve storage and transportation infrastructure…", an RBI statement quoted him as saying. After showing a marginal decline in March to 6.89 per cent, wholesale price-based inflation rose to 7.23 per cent in April. The rise in inflation was mainly due to increase in prices of food items.

On the other hand retail price inflation (CPI) entered double digits of 10.36 per cent in April from 9.38 per cent in March. RBI has already said that it would take into account recent developments, including on inflation front, while announcing its mid-quarterly policy review on June 18. The central bank which had adopted a tight monetary policy since March 2010 to tame inflation, had cut the benchmark interest rate by 0.5 per cent in its April policy to revive economic growth.