New Delhi, March 26
Despite the fact that there are so many uncertainties in India like slowing industrial growth and rising inflation, finance minister P. Chidambaram is confident that in 2008-09 the GDP growth will continue to be 9 per cent.
Speaking at the Lee Kuan Yew School of Public Policy in Singapore, Chidambaram said constant challenge was to maintain macro economic stability in general and price stability in particular.
The two factors that affect the poor are inflation and loss of jobs. “As you are aware, these two factors are highly correlated to the structural adjustment process. When inflation rises or when there are large-scale job losses, people begin to question the justification and advantages of reforms,” he said.
“In a democratic system, the governments are under pressure to slow down — and some times reverse — the reform process. However, in India, we have been able to ward off such pressures by taking steps to lessen the negative impact of reforms. We have not hesitated to use fiscal, monetary and public policy instruments to contain inflation and ensure that the growth process creates jobs,” Chidambaram added.
While sharing both achievements
and concerns of India, the minister said rise in the price of crude oil was another example of “greed” overtaking the common good of the world.
“Surely, it is nobody’s case that the cost of producing a barrel of crude oil is close to $110. Equally, it can be nobody’s case that risks of exploring and producing oil have risen so high that the price of crude oil should spiral from $34 to $110 in four years. The same could be said for food prices. While there is indeed some supply-demand mismatch, there is no case for raising the prices so high that the poor cannot afford to buy food anymore,” the minister stated.
Amongst the biggest concerns raised by the minister is that global slow down, rising inflation and subdued interest in investment makes for a combination that can only have negative consequences for developing countries.
Anticipating these, Chidambaram said: “We have taken steps to stimulate domestic demand in the Indian economy. We believe that the measures announced in the Budget, including significant reductions in personal income tax, expanding and deepening corporate debt market, and large outlays of public expenditure on education, health, roads and irrigation, should encourage both domestic and foreign investors to continue to have faith in the India growth story.”
