Finance Minister P Chidambaram said on Friday the Reserve Bank's liquidity tightening steps to check rupee volatility would also help in moderating inflation.
"Liquidity tightening measures though aimed at check speculation in the currency market, would also have salutary impact of inflation moderation," he informed Lok Sabha through a written reply.
With the increased pressure on rupee accompanied by volatility, Reserve Bank of India has taken various measures to tighten liquidity, like increase in the rate for Marginal Sanding Facility and making it mandatory for banks to have 99 per cent of the cash reserve ratio on daily basis.
Inflation, based on the Wholesale Price Index, increased to a five-month high of 5.79 per cent in July. The rate of price rise was 4.86 per cent in June.
Chidambaram further said government has taken a number of fiscal and administrative measures from time to time to contain inflation especially food.
The measures include, reduction of import duty to zero on several items like wheat, onion and pulses and banning of export of edible oil and pulses.
WPI inflation in the food articles category rose to double digits at 11.91 per cent in July.
The rupee had lost 44 paise to close at a new low of 64.55 against dollar, after breaching the 65 mark to all-time intra-day low of 65.56 in Thursday's trade at the Interbank Foreign Exchange market.