Friday, October 14 2005 19:08 Hrs (IST) - World Time -

New Delhi: Finance Ministry today (Oct 14, 2005) said Government and Reserve Bank were committed to maintaining price stability even after inflation breached 4 per cent mark.

"Government and RBI are committed to price stability and moderate inflation," Chief Economic Advisor Ashok Lahiri said reacting to the rise in inflation to 4.24 per cent during week ended October one.

"Inflation continues to be moderate. 60 per cent increase was due to fuel, power, light and lubricant group index, 30 per cent was on account of manufacturing and 10 per cent for primary products," he said.

Surge in prices of vegetables, edible oil along with other food items, industrial fuels and manufactured products pushed up inflation to 4.24 per cent during week ended October 1 from 3.97 per cent a week ago.

The delayed impact of fuel price hike, festival demands and seasonal factors may have led to rise in inflation to over 4 per cent for the week, although it was still lower than 7.15 per cent a year ago.

Lahiri said the rise in inflation was partly due to the 'base year effect'. The wholesale prices had started declining sharply during September end 2004.

Lahiri indicated that recent hike in domestic price of fuel in the wake of surge in global crude oil prices was mainly responsible for the gradual rise in inflation after touching over three years low of 3.01 per cent in August.

He expressed the hope that crude oil prices would stabilize at lower and realistic levels in medium-long term was realized sooner than later.

On interest rates, he said it depended on the market.

"It is very clear that excessive rise in inflation is not good for the economy and interest rates. It was important that balance of payment and inflation was kept under manageable levels," he added.

Lahiri also said the current liquidity position was not impacting the Government borrowing programme.