Prime Minister Manmohan Singh said inflation is a concern and that his government will remain “vigilant” to ensure the poor in the world’s second-fastest growing major economy are not affected by high prices.
“We have taken credible steps to control inflation and will continue to be vigilant on this front so that the poor and vulnerable sections of society do not suffer,” Singh told a meeting of his United Progressive Alliance (UPA) coalition allies at a meeting to mark the third anniversary of his government in New Delhi.
India’s inflation has remained above the Reserve Bank of India’s target of 5%, even after the central bank raised its key interest rate to a five-year high and the government cut import taxes on cement, wheat and other products to cap price gains. Inflation slowed to 5.44% in the week ended 5 May after reaching a two-year high of 6.69% in January.
“Inflation has now begun to moderate due to the monetary steps taken by the Reserve Bank of India and is further expected to slow in the coming months,” said N.R. Bhanu Murthy, an economist at the Institute of Economic Growth in New Delhi. Singh said India’s economic growth had boosted demand and put pressure on prices, especially of farm products. His government will announce measures in the next 10 days to boost agriculture production, he said.
But prices of wheat, lentils and other agricultural products rose twice as fast as manufactured goods last year as demand outpaced supplies. The government, which is importing wheat for a second year, has banned the export of pulses and cut the import tax on edible oil to curb farm prices that have risen at 10.7% in the week ended 31 March against the 5.8% price gains for manufactured products. “We have made arrangements to augment supplies wherever feasible and hope to keep prices in check,” Singh said.
The prime minister said that the gross domestic product (GDP) has managed to grow by 9% without compromising on fiscal discipline becaue the investment rate is at an all time high, of around 35% of national income. The high investments rate will help tackle poverty, the UPA said in a report summarising the achievements of its three-year rule.
On an average, GDP has grown 8.6% under the present government.
India wants to contain inflation without slowing economic growth from its targeted 9% annual average for the next five years as it aims to reduce poverty in the world’s second most populous nation. Inflation will slow to 5% in the next few months as the government controls prices, Singh said last week. The goal of the government is to contain inflation between 4% and 4.5%, finance minister P. Chidambaram said on 17 May. More fiscal and monetary measures may be taken by the government and the central bank to curb inflation, he said.
“We recognize that high national income growth alone does not address the challenge of employment promotion, poverty reduction and balanced regional development. Nor does growth in itself improve human development,” Singh said.
Rising prices may have alienated voters, who ousted Singh’s Congress party in two state elections in February. The Congress also failed this month to gain ground in the country’s most populous state of Uttar Pradesh, which it hasn’t ruled since 1989.
The government will focus in the next two years on implementation of various social welfare programs announced by it in the past, Singh said.
He said the government would bring in a legislation regarding public services to lay down public service standards, values, code and ethics, protect whistle blowers and provide for perfomance management. Against the backdrop of the special economic zones raging controversy, Singh said the government was in the process of preparing a new rehabilitation policy that will strengthen compensation for those ousted from their lands due to major projects.
Underlining the government’s focus on HIV/AIDS, polio and affordable and safe medicines, the government said it has set in motion an improved access to quality healthcare for people, especially those living in rural areas, through the National Rural Health Mission.
(PTI and Mint’s Pragya Singh contributed to this story)