Interest rate may go up to curb inflation, Chidambaram hints

March 28th, 2008 - 10:22 pm ICT by admin  

A file-photo of P. Chidambaram

Mumbai, March 28 (IANS) Union Finance Minister P. Chidambaram Friday hinted that interest rate may go up in the coming days in order to curb the inflation rate. Speaking at the valedictory function of the Indian Merchants’ Chamber (IMC) centenary celebrations, the minister said the central bank has been asked to look into the modalities of the monetary policy.

“I have already started looking into the fiscal aspect of it,” he added.

Chidambaram said the primary reason behind the jump in the inflation “lies in the fact that at present it is a worldwide phenomenon. But more than that, we are currently importing inflation”.

Elaborating on the theme, he explained the logic behind the farm loan waiver announced in the recent union budget speech. “We wanted to open the choked up production in the arable land. Farmers were bogged down by loans and the entire agrarian production was slowly coming to a standstill. Does anybody know what does it mean to import commodities or for that matter essential commodities? It means importing inflation.”

Chidambaram focused on the issue of loan waiver and its connection with the inflation in valedictory speech.

“The entire country was taken aback at the radical decision taken by our government on the farm loan. The rise of crude commodities prices coupled with the inflationary expectations have given rise to the jump in inflation,” he said.

“Not many people realise that through the radical step, we have tried to pave the way to self-sufficiency, which is one of the most important steps in combating the inflationary rate,” the minister added.

Earlier in his speech, Chidambaram stressed the need to address the problems faced by the masses of the country.

“Agriculture is one sector which really needs to be addressed. Just imagine, 60 percent of population is involved in a sector, which hardly registers a growth rate of more than 2.5 percent. It is imperative that we focus on this sector,” he said.

He dismissed the cynics and critics who questioned the government’s loan waiver decision, stating, “The waiver is akin to the corporate debt restructuring. It is a common phenomenon and practice in the corporate world to write off bad debts and clear the choke up. This is what we did.”

Taking a dig at the previous governments, the minister said all of them had made only promises but never took steps to “see the crystallisation of the dreams they used to weave for the masses”.

“We have tried it and that’s why the most neglected sectors like primary education has received so much of focus in the budget. It is precisely due to our concern towards the masses that we have increased the budgetary allocation for mid-day meal scheme,” he said.

Chidambaram also lauded the growth of small and medium enterprises (SME) terming them as “the engine of country’s economy”.

On the issue of global warming, he expressed concern and said the per capita emission from the developing nations would never exceed that of a developed nation.

“On a lighter side I would like to inform that CEOs and managing directors had raised objections when I introduced e-tax returns filings. Not many know that I have saved thousands and thousands of trees by introducing this system,” he smilingly said.

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