Brace up for a bout of sustained inflation, that''s
what the Economic Survey suggests. It says that the pressure
of prices will persist during the year because of short
supply of essentials, and firm international prices.
On
the other hand, demand is being fed by high growth, the
surge in reserve money because of foreign inflows, the
rise in money supply and the huge increase in credit.
The impact of duty cuts and the Reserve bank''s policies
will be felt in the days to come. But unless supply of
essentials is increased, inflation will not be fully tamed.
The
survey calls for increase in domestic production of staples
like rice, wheat, cooking oils and pulses through better
technology. It says, in the short run, there will be a
gap between the remunerative price paid to farmers and
fair price to consumers but these should not translate
into increased food subsidy.
o
Expects pressure on prices during this year
o Says short supply of staples, high global prices the
reason
o Demand fed by high growth, foreign inflows, money
supply, credit
o Impact of duty cuts, dear-money policies to be felt
shortly
But inflation will remain unless supply of staples improves.
Speaking
about the survey, the finance minister P Chidambaram said
that one of the key challenge for the government is to
tame inflation without hurting growth.
He
says that the government will continue to take steps to
combat rising prices. Chidambaram feels that they may
reach desired gross domestic investment target by the
start of the 11th plan. He informs that issues that need
to be addressed have been identified.
"Despite
concern about the rising prices, we share the concern
and we have taken a number of steps to moderate prices
and we will continue to take steps. The most heartwarming
aspect of the economy is that both gross domestic savings
and gross domestic investments have moved up very sharply.
In fact, it appears that we may have reached the desired
gross domestic investment target even at the beginning
of the 11th plan period," says Chidambaram.
According to the finance minister, sustaining high growth
without high inflation is a key challenge. He is looking
at a multi-pronged, multi-sectoral approach to development.
In
his view, managing growth remains a priority. Also, fiscal
prudence, government intervention in sectors and high
investment are other priorities. The finance minister
aims to look forward to another year of high growth. "We
have identified issues, which need to be addressed. The
most important issue is the human and general development
indices; for India it''s still low, in fact between 2003
and 2004, India''s relative rank moved up only by one place.
These
issues can be addressed only by a multi-pronged, multi-sectoral
approach to development. We have identified two main issues
and we have also identified three priorities."
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