Chidambaram says inflation will be moderated

RELATED NEWS No near term let up in inflation likely Inflation at 6.09% against mkt estimate of 6.14% RBI keeps key rates intact, trims GDP growth rate to 8.5% You cannot manage inflation well in the long-term: ICRA India can sustain economic growth at current levels: JF AMC Nifty BSE | NSE 31/05/12 Are Mutual Funds betting on Nifty?

 

The Minister added that on the supply side "we have not hesitated to provide finance to import food items to meet rising demand." He said that while replying to the demands for grants of the Agriculture Ministry, the Union Minister of Agriculture, Food & Consumer Affairs, Mr Sharad Pawar, had said that the Government had taken steps to augment production and productivity of foodgrains and pulses. He said that the UPA government had provided "a new thrust to agriculture".

Reeling out statistics on inflation for the pasts several years, the Finance Minister said that even the average inflation rate of 5.4 per cent in 2006-07 was high which required to be brought down to 4.5 per cent. But this must be seen in the context when average inflation was 5.9 per cent in 1998-99, 7.2 per cent in 2000-01 and 5.5 per cent in 2002-03, while the peak rate of inflation in all these years were 7.3 per cent, 8.8 per cent and 6.9 per cent, respectively. He said that during 2000-01, inflation ruled at over 6 per cent for 48 weeks and 8 per cent for 12 weeks.

Contributing factors

He attributed five reasons for resurgence of inflation in recent years. Foremost, he said, was that there was worldwide increase in commodity prices with metal prices going up last year by 11 per cent. Second, there was supply-demand mismatch of essential goods of mass consumption. Third, Mr Chidambaram said, public expenditure had been on the rise "justifiably so during the past three years when the government had to undertake several social sector programmes of education, health and rural development as per the mandate of the National Common Minimum Programme (NCMP)".

The fourth reason for rising inflation, he said, was that the higher rate of growth of GDP (gross domestic product) had stimulated higher demand for goods and services and this was reflected in rising consumption as reported by the latest National Sample Survey Organisation (NSSO) on consumption pattern in the country. Finally, he said, there had been large capital inflow in the form of foreign direct investment, foreign institutional investment, remittances, private equity, export earning, and external commercial borrowings, which have increased the money supply in the country.

Taken from Business Line

thehindubusinessline.in