Chidambaram prescribes the ‘bitter’ economic pill

Finance minister P Chidambaram told Parliament today that some ''bitter medicine'' is necessary to restore the health of the economy and get back to a high growth path, strongly hinting that some more unpopular measures in line with the recent hike in diesel prices and cap on LPG subsidy are in the offing.

''Some bitter medicine has to be taken this year. We have to take some bitter medicine. There is no other way ... this medicine is good medicine. It will restore the health of the economy and next year we can look forward to much higher growth,'' he said while winding up a discussion on the first batch of supplementary demands for grants in the Lok Sabha.

After growing at over nine per cent, India's GDP slipped to a nine-year low of 6.5 per cent in 2011-12; and is projected by the Reserve Bank of India to further slip to 5.8 per cent at the end of this fiscal.

The finance minister also expressed confidence that inflation, which has continued to rule stubbornly high for almost 24 months now, would moderate in the next two to three months.

''Inflation is a challenge. Inflation worries the government. While CPI (consumer price index) inflation is sticky, the good news is that WPI (wholesale price index) inflation seems to be trending downwards ... this will be some reason for comfort,'' he said.

The WPI inflation, which is based on movement in wholesale prices, moderated to 7.24 per cent in November from 7.45 per cent a month ago. Retail inflation, however, was at 9.9 per cent in November, up from 9.75 per cent in October.