PM to take steps to check inflation, promote growth: Chidambaram
Chandigarh: 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 on Friday.
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 were taken 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 percent in 2011-12 after clocking over 8 percent growth in the previous two consecutive years. At the same time, overall inflation rose to 7.55 percent while retail inflation was 10.63 percent 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 Minister 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 percent of GDP compared to 2.7 percent in the previous fiscal. As per the government estimate, the fiscal deficit is expected to be 5.1 percent 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.
Chidambaram observed that rising global crude prices had also contributed in fuelling inflation.
"During the NDA regime, the average cost of crude price was USD 20 per barrel and in UPA-I the average crude oil price was USD 70-75 dollar per barrel. But now, the average oil price is more than USD 100 per barrel," he said.
The Minister said there was a sharp hike in petrol prices recently but it was reduced later. However, the Centre did not touch prices of Kerosene, he said.
Chidambaram said the government would take appropriate measures with regard to fuel prices while keeping in mind the "economic considerations and socio considerations".
"There is a strong economic argument that we cannot sustain high level of (fuel) subsidies and there is a political argument that prices cannot be increased beyond a point because people will bear the increase in price... I hope government will take some decision on that...Petrol is deregulated the other three (diesel, cooking gas and kerosene) are not.
"We must leave it to the government to take some appropriate measures. I am sure we will balance economic consideration and social considerations," he said.
Asked about the issue of Goods and Services Tax (GST), Chidambaram hoped that the Empowered Committee of State Finance Ministers on GST, which is led by Bihar Finance Minister Sushil Modi, would be able to resolve their pending issues.
"I am confident that GST issue will be resolved and I am confident that Sushil Modi will be able to find a solution (to their pending issues)," he said.
He said if states resolve their issues on implementation of GST it can be implemented from next fiscal.
Chidambaram said the Centre had also been urging the Empowered Committee of State Finance Ministers on GST to negotiate with it to resolve their issues at the earliest.
On achievements of the UPA government, Chidambaram said the Centre added 20,000 MW of additional power in the last financial year. Besides 8,000 villages were electrified in the last fiscal.
Among other achievements, he said more than 700 km of railway lines were added and 5 lakh new classrooms were set up and 51,000 new primary and upper primary schools were opened. "6.8 lakh teachers were appointed," he said.
Asked about Punjab's demand for 50 percent share in central taxes, Chidambaram said it was the Finance Commission that decided about the share of states' in taxes. The current rate of share is 32 percent, he said.
Chidambaram said despite decline in growth, the Centre was funding the 15 flagship programmes and they are being implemented across the country.
He said Punjab's annual plan had reached Rs 14,000 crore for the current fiscal against Rs 11,520 crore in the last fiscal. As per 13th Finance Commission (2010-2015, Punjab would get Rs 25,686 crore from the Centre which was up from Rs 12,885 crore announced by 12th Finance Commission.
He said Haryana's annual plan has reached a figure of about Rs 26,485 crore while it would get Rs 19,470 crore as announced by 13th Finance Commission.