Inflation will moderate in coming months: Plan panel (Lead)

October 30th, 2008 - 11:12 pm ICT by IANS  

Bangalore, Oct 30 (IANS) Inflation rate will moderate in the coming months as a result of fiscal and monetary policies taken by the central government and the Reserve Bank of India (RBI), Planning Commission Deputy Chairman Montek Singh Ahluwalia said here Thursday.”Inflation is being tamed with effective measures. It will moderate over the next few weeks and may drop to single digit in the coming months as the underlying rate of inflation is much lower than the WPI (wholesale price index),” Ahluwalia told reporters on the sidelines of a conference on the role of technology in power distribution.

According to the latest data of the ministry of commerce and industry, the annual rate of inflation eased to 10.68 percent for the week ended Oct 18 from 11.07 percent the week before.

The WPI for all commodities showed a decline of 0.2 percent, with the index for primary articles like raw rubber and groundnut seed declining 0.3 percent.

“On annualised basis, the inflation rate has gone by only four percent during the last eight months. With global commodity and fuel prices on decline, the rate of inflation is bound to go southwards. The government will not hesitate to take more steps to ensure inflation is reined in to manageable limits,” Ahluwalia affirmed.

On the GDP (gross domestic product) growth rate this fiscal (2008-09), the Planning Commission deputy chairman said in the worst scenario, even a seven percent growth rate would be one of the highest in any emerging market economy.

“Even on the most pessimistic note, if the economy grows by 7-7.5 percent GDP, it will still be second to only China, which is also expected to grow by nine percent - two percent less than 11 percent in the previous year (2007),” he said.

“Though the RBI and other agencies - public and private - revised their GDP targets downwards to 7-5-8 percent for FY 2009 on account of the prevailing uncertainty, global economic slowdown and financial turmoil, worldwide, the government has taken adequate measures to ensure as much growth as possible, including employment generation,” Ahluwalia said.

“What we are feeling is the pain involved in going from a high growth rate of 9 percent to 7 percent, which is not bad in the light of what’s been happening globally due to financial turmoil, slowdown and signs of recession in the US economy,” he pointed out.

To sustain the growth momentum, the planning commission is working on a strategy to implement the credit contra-cyclical policy wherein huge investments in building and scaling infrastructure such as power, roads, irrigation, drinking water and housing.

“To maintain the pace of development, we have to make use of this opportunity to invest in infrastructure. Investment in infrastructure projects should not be guided by the prevailing market situation. We must have a 20-year horizon to expand infrastructure,” Ahluwalia noted.

The Planning Commission will discuss the investment strategy with relevant ministries for an action plan as contra cyclical device.

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