Asserting that the wholesale price index inflation on a point-to-point basis stood at 6.5 per cent in 2004-05 as against a projected five per cent, he said that WPI inflation had remained at above seven per cent, including a high of 8.8 per cent, for 22 consecutive months during National Democratic Alliance rule in 2000-01.

Chidambaram said "The worst seems to be over now ... if oil prices moderated, WPI inflation will also moderate in the near future".

He said a major reason for inflation during the NDA rule was "rather poor liquidity management" with liquidity of money touching a growth rate of 16.6 and the United Progressive Alliance regime was now targeting to bring it down to 14.

RBI had indicated the excess liquidity had come down from Rs 81,000 crore (Rs 810 billion) in April this year when the UPA came to power to about Rs 68,000 crore (Rs 680 billion) on December 8.

This excess liquidity was on account of foreign capital inflows, he said adding RBI was taking a number of measures to reduce liquidity.

Asked whether high imports were also impacting on inflation, Chidambaram said import generally had a "restraining impact" on prices as it fills the gap between supply and demand.