Sunday, March 30, 2008

Government to decide whether to sacrifice a bit of growth to contain inflation

Indian merchants` chamber is celebrating its centenary. In the Valedictory Function of the Centenary celebrations held on Friday, the 28th March 2008. P. Chidambaram, Hon`ble Union Finance addressed members on the special event and touched various topics related with global and Indian economy.

Speaking at the valedictory function of the Indian Merchants` Chamber (IMC) centenary celebrations, the minister said the central bank had been asked to look into the modalities of the monetary policy. Chidambaram said the primary reason behind the jump in the inflation rate lies in the fact that at present it is a worldwide phenomenon. But more than that, we are currently importing inflation”. Higher prices of imported goods and services playing crucial role in inflation.

Expressing concern over high rate of inflation, the Union Finance Minister, P. Chidambaram, said here that the Government will soon decide whether it should sacrifice a bit of growth to contain inflation. Eight per cent economic growth and four per cent inflation would be the ideal balance.

Speaking at the valedictory function of the Indian Merchants Chamber`s centenary celebration, Chidambaram said, “fiscal measures to contain inflation have been taken in the Budget, monetary steps will be taken by the Reserve Bank of India and on the supply side the Agriculture Ministry has an important role to play.”

Though the Government is willing to import wheat, rice or edible oil to contain the price rise, they are not available in the global market. Every other country has banned export of agriculture commodities.

Agriculture is one sector, which really needs to be addressed. Just imagine, 60 per cent of the population is involved in a sector, which hardly registers a growth rate of more than 2.5 per cent. It is imperative that we focus on this sector. In the entire GDP pie, agriculture is the only sector, which is lagging. Today, if you ask 10 farmers on whether they want to continue farming, nine would say no and one might say may be if there is no option.” he said. Chidambaram also stressed the need to accelerate the growth of small and medium enterprises (SME), terming them as the engine of the country`s economy.

Higher saving and higher investment are two major growth drivers of Indian economy and it will boost overall growth. Good economics will work for everyone but not at the same time. Sectors, which are already, have strong absorption capacity will take growth benefit first and the sectors, which are weak, will take some time but in long term they will enjoy growth and developments.

Global warming

On the issue of global warming, Chidambaram expressed concern and said that the per capita emissions from the developing nations would never exceed those from the developed nations.

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