New Delhi: The main opposition party on Wednesday upped pressure on Prime Minister Manmohan Singh’s government to tame soaring prices, demanding steps such as releasing 25 million tonnes of grain to the open market and reining in the fiscal deficit.
The Bharatiya Janata Party (BJP) has sought to put the government on the back foot over issues such as corruption and inflation at the start of a rowdy monsoon session of Parliament.
Sustained attacks could potentially dent the ruling Congress party’s pro-poor credentials as it gears up to contest elections in India’s most populous state, Uttar Pradesh, due by next year.
Opposition protests have effectively shut parliament for much of the past year, stifling the progress of major economic reforms that could accelerate growth in Asia’s third-largest economy, which is now showing signs of slowdown.
Headline inflation accelerated to 9.44% in June and policymakers say it is likely to remain close to that mark until October. Such high prices have sparked large street protests and prompted the Reserve Bank of India (RBI) to raise interest rates 11 times since March 2010.
Of particular concern have been high food prices. Food price inflation has come off peaks hit over a year back, but still remains stubbornly high over 7%.
“The government can control inflation in the next two months if it releases more food stocks, takes steps to curtail the fiscal deficit and check corruption,” Yashwant Sinha, a former BJP finance minister told Parliament.
In a speech sprinkled with barbs at the Prime Minister, who was also a former economist and central bank governor, Sinha criticized the government for failing to deliver on reassurances that inflation would slow down, and for relying too much on the central bank to ease prices.
“The government cannot pass the buck to RBI, which has only one instrument of raising rates to control inflation,” he said at a debate on inflation. A prominent Congress minister hit back, saying that high international crude prices and the global economic slowdown had fuelled inflation.
Parliament is expected to pass a resolution on Thursday expressing concern on inflation and ask the government to take more steps to tame prices.
“The debate in Parliament points out that inflation is now a national issue and high prices are hurting the common man,” said N.R. Bhanumurthy, an economist at National Institute of Public Finance and Policy, a Delhi-based think-tank.
“The general feeling is RBI has been aggressive but finance ministry still needs to take strict measures particularly to contain wasteful expenditure to rein in inflation.”
Finance minister Pranab Mukherjee on Tuesday sought parliamentary approval for a net Rs9,016 crore ($2.04 billion) extra spend in the current fiscal year ending March, but said the additional expenses will not impact its fiscal deficit and borrowing targets.
The prime minister’s Economic Advisory Council said on Monday that government will find it a “challenge” to meet fiscal deficit target of 4.6% of GDP this fiscal year, and advised stronger measures to increase revenue and cut spending.
India’s economy is showing signs of slowdown, with July’s factory expansion the weakest in 20 months. A government panel has cut its growth estimate to 8.2% from 9% for the current fiscal ending March 2012.