New Delhi, November 7
Finance Minister P. Chidambaram, addressing the two-day Economic Editors’ Conference that began here today, made three significant observations. He said if the banks re-balanced their portfolios, there was no immediate need to raise interest rates; two, the recent price rise had been due to low production and procurement of wheat, sugar and pulses; and that the states should crackdown on private moneylenders to stop farmers’ exploitation and suicides.
Mr Chidambram, who met government bankers yesterday, said credit growth had been brisk in RBI-identified three segments: personal loans, credit cards and real estate. While re-balancing portfolios, banks should focus on agriculture, industry and services, he said.
He indirectly blamed the Agriculture, Food and Civil Supplies Minister for the poor procurement and supply of wheat, sugar and pulses in the last season and the states for vegetable supply distortions that caused a spurt in the prices of essential commodities.
The situation is no different this year as the minimum support price (MSP) of Rs 750 for wheat this year is far below the market price and the Central and state agencies may not be able to procure enough stocks for the Central pool.
He, however, expressed hope that the procurement targets would be met with the cooperation of states. He made appeals for cooperation to the Chief Ministers of Punjab, Haryana, Uttar Pradesh and Chhattisgarh.
Asked why the government was paying Australian farmers more for wheat than Indian farmers, he said only the last wheat import consignment was more expensive, otherwise the landed cost of imported wheat was not higher than the locally procured product, if transportation and handling charges were included.
Commenting on farmers committing suicides due to indebtedness, he said most victims had taken loans from moneylenders and the states should check them. “The government banks were meeting their social commitments through 40 per cent lending
to the priority sector, including 18 per cent to agriculture”.
Denying that the government was harsh on senior citizens, he said the UPA government had given them income tax relief and higher interest rates. As for social security, only 11 per cent of the population had some security. The proposed pension law would help employees plan for their future through better investment of their savings.
He listed challenges before the UPA: sustaining the present growth momentum, deepening of reforms, balancing growth with equality, rejuvenating agriculture, meeting energy needs of the growing economy and expanding infrastructure.
On VAT, he said Tamil Nadu would adopt it on January 1, Puducherry would follow the suit soon, but Uttar Pradesh might have to wait until the elections were over.
Asked about the possible revenue loss due to the upcoming special economic zones (SEZs), he said, “It is only when the SEZs become operational that we can accurately estimate the loss of revenue.”
