Policymakers signal concern over inflation

By Saikat Chatterjee and Rupam Jain Nair

MUMBAI/AHMEDABAD (Reuters) - Policymakers signalled their concern about price pressures after inflation hit a 14-month high on Friday and the finance minister said India could give up a bit of growth to bring it down.

Finance Minister Palaniappan Chidambaram, on a visit to the financial hub Mumbai, told reporters interest rates remained the most effective instrument to manage price pressures.

Deputy central bank governor Rakesh Mohan said however the central bank needed to examine the price data carefully before it could reach any conclusion.

"I think that as you know from our various statements that we have been anticipating and seeing signs of inflation but I think this is higher than we anticipated," Mohan told reporters in Ahmedabad.

"It will take us some time to observe and we need to look at the global factors like oil prices and other supplies to come to a conclusion."

Data on Friday showed annual inflation at 6.68 percent in the 12 months to March 15, higher than the previous week's 5.92 percent and well above the central bank's comfort ceiling of 5 percent.

Earlier Mohan said in a speech the objective was to contain inflation under 5 percent and bring it lower in the medium term.

"To keep the momentum of high growth it is extremely important to recognise that the best contribution monetary policy can make is indeed to ensure that inflation and inflation expectations are well anchored," Mohan said.