New Delhi: Finance Minister Pranab Mukherjee Monday said the challenge before the government and the RBI is maintaining price stability without hurting growth, even as economists made a strong case for improving agriculture productivity to tame rising inflation.
"...the challenge before the Government and the monetary authority has been to support the recovery process without compromising on price stability. The task has not been easy" Mukherjee said at a pre budget consultations with economists.
High food prices, caused in part by severe drought conditions last year, and by rising incomes, have been driving inflation in India, he said, adding, other countries are also experiencing rising food inflation.
"With normal monsoon, we are looking at a significant rebound in agriculture and allied sectors growth at about 6 percent," he said.
Leading economists in their suggestions to Mukherjee said that efforts should be made to improve agriculture productivity to check food inflation which soared to 18.3 per cent in the last week of December.
Mukherjee in his opening remarks said the rapid recovery of the growth momentum is comforting, but the government cannot be complacent as there are several challenges that the Indian economy faces from its current external and domestic context.
"Global recovery remains fragile. India's growth momentum, to some extent, is affected by developments in the western world. A faster recovery in the west is in the global interest," he said.
The sharp increase in international crude oil and other commodity prices, he said, "is a reality that we are already confronting."
Crude oil prices are hovering around USD 98 per barrel and is expected to cross USD 100 per barrel.
Speaking about the meeting, Ficci Director General Rajiv Kumar said, "While some people said you have got to use monetary policy to control inflation. I think the majority view was that inflation is a supply-demand phenomenon at the moment.
"Therefore, you have to focus on agriculture productivity, agriculture production, irrigation and investment in the public irrigation," Kumar said.
Even, the restriction on movement of food articles should be relaxed so that supply condition improves, Kumar added.
"With normal monsoon, we are looking at a significant rebound in agriculture and allied sector growth at about 6 percent," the finance minister said.