Arresting inflation will take time, we must have patience: PM

May 18th, 2008 - 12:21 am ICT by admin  

Manmohan Singh

By Ashok Dixit
Bagdogra (West Bengal), May 17 (ANI): Prime Minister Dr. Manmohan Singh on Saturday accepted that inflation in the country was a matter of concern, and reiterated that his government was taking all possible steps to reduce it.
Interacting with the media here after ending his two-day visit to Bhutan, Dr. Singh said that when the UPA Government had come to power in May 2004, inflation was six percent, and his government had managed to bring it down to between five and five-and-a-half percent.
Inflation is a problem, our objective was to keep inflation between 5 and 51/2 percent. When we came to office inflation rate was 6 percent. We succeeded in bringing it down. But in the last one year, there have been events over which we have no control but which have influenced the sentiments of prices in our country. There has been an investment boom all over the world and the prices of metal, steel, and cement have all shot up and as a result the whole sale price index in our country is now verging close to eight percent per annum, he said.
In the last year, however, he said, that there has been an investment boom all over the world, and as a result the prices of such commodities as steel, cement and oil had spiralled out of control, pushing domestic inflation up to nearly eight percent (7.83 percent).
We have taken effective steps I have met the steel manufacturers and asked them, the commerce and industries minister to persuade the cement industry to moderate their price behaviour. I have been assured that action will be taken so I am hopeful that in the next few weeks there will be a moderation in the inflation, but I think we must not forget that what we are trying to do is in some ways unusual, he said.
If inflation is the only problem, we could have a drastic monetary policy, sharply reducing the money supply by raising interest rates, but that will land us in a serious industrial recession and unemployment. We want to control inflation without hurting the rhythm of the growth process, which is moving forward at 8- 81/2 to 9 percent in the last four years. There is no magic solution to the problem. Prices do rise in the period between May and September, Singh added.
Furthermore, he emphatically said that the pressure of inflation had not be allowed to percolate down to the poorest of the poor or the underprivileged sections of society. They had been spared. Oil prices may have gone up, but the government had ensured that the prices of kerosene oil had remained at the same level, as it was a product used in a majority of households across the country.
I would like to say that the government has adopted significant measures to insulate the poor and the underprivileged sections of society from the effects of inflation. In the last four years, prices of food grain through the public distribution system to both the above poverty line and below poverty line have not been increased at all. This has happened at a time when we have to give our farmers hefty increases by way of procurement prices to give them an added incentive to produce more wheat and rice, he said.
Now it is because of this delicate balance, it is not easy and it takes time that transition problems arise my request to every one concerned is to have patience. I am confident that with the excellent procurement of food grains both wheat and rice, if we have a normal monsoon, we will see a moderation in the price behaviour, but one has to be patient, the Prime Minister said.
One cannot say each week that the government must take some measures to bring down the prices or have some solutions, because you must recognize that even in a normal year, prices do rise seasonally between May and September. The real test will be the measures that we have taken, the RBI measures to raise the cash reserve ratio and other measures taken by the government to liberalise the import regime and restrict the exports I request the public at large and political parties to give these measures a chance to succeed. My feeling is that if the monsoons are normal in the next few weeks you will see a moderation in inflation after September 15th, Singh said.
There has been a sea change in the international environment for energy. When we came to office the price of a barrel of oil was 35-36 dollars, today it is 122 dollars per barrel. We have to ensure that there will no adverse effects on the poorest sections.
Our government has a two-fold strategy to increase production, ultimately that is the only way to bring about a balance between supply and demand without hurting the growth process.
Imports need to be liberalised so that any attempt to cartelization by domestic producers can be discouraged. To discourage exports where necessary so that more supplies are available for the poorest sections of our society and simultaneously to see that our PDS is so operated that the poor are protected to a maximum extent possible against rising prices, the Prime Minister concluded. (ANI)

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