Inflation for March may be higher than 8.56%: FM

Excerpts from Reporter's Diary on CNBC-TV18 Watch the full show » RELATED NEWS Factory output growth eases; seen slowing more India set to return to 8.5% growth in FY11: Ahluwalia PM says economy to grow at least 8% in FY11

The 7.2% GDP growth rate target is not a pipe dream, said Finance Minister Pranab Mukherjee. He was replying to the Budget debate in the Lok Sabha today. Earlier in the day, the Finance Ministry's Chief Economic Adviser, Kaushik Basu said the economy is likely to expand over 8.5% in the March quarter.

 

He also said that the Budget for 2010-11 aims to cut India's fiscal deficit to 5.5% of GDP, from this year's 6.7%. This is even lower than the 5.7% suggested by the 13th Finance Commission. The Finance Minister added that the Budget also aims to avoid a 1991-like situation, when India had to pledge gold with the Bank of England to avert a balance of payment crisis.

 

Due to the drought in most parts of India last year, Mukherjee sees the Kharif foodgrain shortfall at 15-18 million tonne.

 

On the issue of price rise, Mukherjee said the government has taken corrective steps to remove supply-side bottlenecks. He defended the Budget saying that it has not introduced any new taxes, but only rolled back duty cuts announced as part of the stimulus package.

 

However, he admitted that the partial rollback of excise duty could have some impact on prices. He said March-end inflation may be higher than the 8.56% seen in January.

 

The Finance Minister promises a right to food legislation soon and said the government's fiscal consolidation measures will help to ease inflation.

 

Mukherjee stated that the government cannot rollback the hike in fuel prices. The Minister responded to calls from the opposition for a rollback by saying that the financial condition of the government did not allow for such latitude. "I would have loved to respond to the request of the honourable members of the opposition, but my financial conditions do not permit me to do so. So, kindly excuse me as I am unable to do so."