There are inflationary pressures in India and the government will have to begin supply-side management to tackle food inflation, Finance Minister Pranab Mukherjee told reporters on Tuesday.
He also said Tuesday's central bank rate hike is in line with the government's thinking and policy.
India's central bank raised key interest rates by a quarter point each, as expected, in a bid to clamp down on resurgent inflation and warned that higher food prices could become entrenched if steps to boost output are not taken.
The Reserve Bank of India (RBI) raised its repo rate, at which it lends to banks, to 6.5 percent and lifted the reverse repo rate, at which it borrows from banks, to 5.5 percent.
The RBI also lifted its end-March headline inflation projection to 7 percent from 5.5 percent previously, and said it expected inflation to begin moderating again in the first quarter of the next fiscal year that starts in April.