India unveiled a series of measures on Tuesday to tame inflation and secure food supplies, including the Reserve Bank of India’s second move this month to drain liquidity from the banking system. The RBI is raising the cash reserve ratio (CRR) by 25 basis points to 8.25 percent, its highest level in seven years, with effect from May 24, and it signalled it was ready to act again if price pressures continued to build. “It is critical at this juncture to demonstrate on a continuing basis a determination to act decisively, effectively and swiftly to curb any signs of adverse developments in regard to inflation expectations,” it said in its annual policy review. Finance Minister Palaniappan Chidambaram presented parliament with various measures, including an export tax on basmati rice to follow up on an existing ban on non-basmati rice exports. He also announced a duty cut on imports such as ferro alloys aimed at bringing down steel prices and said there would be more to come in a few days. Annual wholesale price inflation was above 7 percent in mid-April, the highest in three years, as policy planners the world over grapple with soaring food and raw material prices. India, which has about 260 million poor, is sensitive to rising prices because food often accounts for a much higher proportion of people’s expenditure than in developed economies. Fighting inflation has become a top priority for the government as it heads towards a national election due by May 2009. India’s prime minister told a group of businessmen on Tuesday the world community had not done enough to bring down food and fuel prices. “The diversion of land from food crops to biofuels and increasing use of available food grains and vegetable oils for the production of biofuels have greatly contributed to the rising food prices,” Prime Minister Manmohan Singh said. He said he was deeply dismayed by the global response to soaring energy prices, as world oil demand had risen by just 1 percent annually over the past two years while crude oil prices had shot up by over 90 percent in dollar terms. Oil hit a record high just under $120 a barrel this week. Singh said the steps taken by the government — mostly export bans and duty cuts — to ease price pressures would show results in “the weeks and months to come” and that the normal monsoon rains predicted by the weather department should help.

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