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New Delhi: India's Finance Minister Palaniappan Chidambaram on Saturday said the central bank's plan to raise the cash reserve ratio will have a moderating impact on prices.
The Reserve Bank of India (RBI) on Friday announced a two-step increase in the cash reserve ratio, or money that banks need to set aside as a proportion of deposits, to 8 per cent from 7.5 per cent.
"I have said in parliament that we will take some fiscal measures, that the RBI will take monetary measures. This will suck out about Rs185 billion ($4.6 billion) of liquidity. To that extent, it will moderate demand. Therefore, it will have a moderating impact on prices. It will take some time. Don't expect miracles. We must be patient," he said.
On inflation, Chidambaram said, "Don't jump to any conclusion. We are a major importer of crude oil, urea, palm oil, pulses and many metals. International prices of these commodities have either doubled or tripled.
"As long as we are importing these items, we'll be under pressure. We can take some steps domestically but we don't have control over international prices. So we have to be patient. We should not panic. We'll be able to moderate inflation. We are confident international prices will also moderate in the next few weeks."
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