By Cherian Thomas, Bloomberg
New Delhi: India’s economy may expand more than 9 % in the current financial year, Prime Minister Manmohan Singh said, adding that growth is a “necessary condition” to eradicate poverty in the country.
The government wants to accelerate growth to as much as 10% by 2012 to generate jobs and improve the lives of half the country’s 1.1 billion people who live on less than $2 a day. Still, the second-fastest expansion among the world’s top 15 economies pushed inflation in India to a two-year high last month, eroding the purchasing power of the nation’s poor.
“We are trying to curb inflation without adversely affecting the strong growth impulses,” Singh told the lower house of parliament in New Delhi. “The central bank’s effort to moderate growth of money supply and the finance ministry’s move to reduce customs duty on essential commodities will have a desired effect on inflation.”
Inflation has stayed above the Reserve Bank of India’s tolerance level of 5% since September and the central bank may raise its key overnight lending rate next month for the second time this year to curb prices, according to Goldman Sachs Group Inc.
The key wholesale price inflation rate slowed to 6.05% in the week ended 17 February, from 6.63% in the previous week, the Ministry of Commerce & Industry said on 2 March, as cuts in fuel prices and import tariffs made farm and manufactured products cheaper.
Record economic growth, boosted by the fastest increase in bank loans in more than three decades, and higher salaries have stoked prices of agricultural and manufactured products. India’s central bank last month unexpectedly increased the amount of cash lenders have to set aside to cover deposits for the second straight month to curb inflation.
The government lowered the price of auto fuels by as much as 4.5% effective 16 February, the second cut in 2 1/2 months. Finance Minister P Chidambaram last week cut tariffs on diesel and other goods in his budget for the fiscal year starting 1 April. The cuts were the second in five weeks after Chidambaram in January unexpectedly cut import duties on products ranging from sulphur to steel.
India’s $854 billion economy, the fourth-biggest in Asia, may expand at a record 9.2% in the year ending 31 March, following a 9% gain last year, according to the government’s statistics office, making it the world’s second-fastest growing major economy after China.