PM to take steps to check inflation, promote growth: Chidu
Jul 14 2012, 16:43 | By PTI
Government will address issues affecting the economy in the days to come and the country will get back to high growth path, Home Minister P Chidambaram said today.
He said Prime Minister Manmohan Singh will take more measures to contain inflation and bring the economy back on the higher growth trajectory, he told a press conference here.
"It's not correct to say that measures were not taken earlier (to check inflation and promote growth). Measures weretaken earlier. But we find that some more measures are required and I am confident that the Prime Minister will take the necessary measures," Chidambaram said.
The Prime Minister has already identified the issues like promoting savings and investment and containing fiscal and current account deficits, he said, adding, "in the days to come you will find the government addressing these issues and once we address these issues, we will get back to the high growth path," he said.
India's economic growth slipped to nine-year low of 6.5% in 2011-12 after clocking over 8% growth in the previous two consecutive years. At the same time, overall inflation rose to 7.55% while retail inflation was 10.63% in May.
"Getting back to the high growth path is not a matter of rhetorics or politics. We have to address the issues," he said.
On when he was going to take over as the new Finance inister Chidambaram quipped, "I took over as the Finance Minister on May 22, 2004 and I demitted office on November 30, 2008. I cannot look into the future. I am not an astrologer."
When asked if Pranab Mukherjee was not not capable as Finance Minister because the government was now talking about measures to be taken to deal with the current crisis, he said "when Mukherjee was the Finance Minister, he also took a number of measures to address savings, investment and the current account deficit.
"For example last year was a bad year for growth, but we got USD 46 billion of FDI last year."
Admitting that high inflation is a burden on the household, Chidambaram said the government will address the supply-side issues to contain the price rise.
Price rise is a function of supply and demand, he said, adding, it is also a function of the international commodity prices and the exchange rate.
"The Prime Minister is universally acknowledged as one of the leading economists of the world. He will address issues of supply and demand, mainly the supply side. The international commodity price is not in our control but if we take measures in fiscal deficit and current account deficit, the exchange rate issue can be addressed," he said.
"When these issues are addressed over, the medium term prices will stabilise. We have had inflation in the past but we contained it. There is inflation today. I sympathise with the people of India, it is a burden on the household but we will contain inflation. We have to just take the right measures," he said.
During 2011-12, the current account deficit shot up to 4.2% of GDP compared to 2.7% in the previous fiscal. As per the government estimate, the fiscal deficit is expected to be 5.1% of the GDP in the current fiscal.
Chidambaram also said the Reserve Bank is doing its best to check the price rise.
"Monetary policy can do so much to contain inflation. And RBI is doing its best. Our fiscal policy and import export policies have to play their part," he said.
In its latest monetary policy review last month, the RBI kept key policy rates unchanged in its bid to rein in inflationary expectation.
RBI has raised lending rates 13 times between March 2010 and October 2011 to contain inflation that had been hovering near double-digit.
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