NEW DELHI (Reuters) - India is relying on monetary policy to cool demand and calm prices, and is confident it will get over the problem of high inflation, Finance Minister Palaniappan Chidambaram told the UTVi business news channel in an interview on Tuesday.
“The best instrument to reduce aggregate demand is monetary policy and that’s why the Reserve Bank of India, the monetary authority, is the first line of defence,” Chidambaram told the channel.
He also said there would be a need to tighten belts further if oil prices rise higher, and added that interest rates should be in line with inflationary expectations.
India’s wholesale price inflation is ruling at a 13-year high and authorities have cut duties and raised rates to cool prices.
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