Pranab hopes for rains
The finance minister, Mr Pranab Mukherjee, has said food inflation will begin to come down after the middle of next month on the back of good monsoon. The minister, however, predicted a difficult time for the global economy due to European crisis.
Addressing senior executives of financial services firms here on Monday, Mr Mukherjee also said containing oil prices and fiscal deficit are two major challenges before the Indian economy along with taming high inflation, currently running into double digits.
“Inflation in food articles was more than 17 per cent for a long time which will start declining after the middle of July, 2010 as the monsoon is expected to be normal this year,” he said.
Monsoon accounts for 80 per cent of rains India receives and 60 per cent of the area under cultivation is rain-fed. Last year, the country’s crop production was hit owing to poor rains, leading to an upward spiral in food prices.
Mr Mukherjee attributed high inflation to constraints in supply side of food articles. Driven by spiralling prices of essential items, inflation surged to double digits at 10.16 per cent in May, the highest in the last 19 months.
Besides food items, inflation has spread to manufactured items including metal, textiles and plywood.
The minister said another challenge before the Indian economy is to contain the oil prices as it has to import more than 70 per cent of its demand from outside.
The empowered group of ministers, headed by Mr Mukherjee, will consider raising petrol and diesel prices by Rs 2-4 per litre on Friday in Delhi.
The minister also said the first challenge before the country is to return to the path of fiscal consolidation and bring down fiscal deficit to 5.5 per cent this fiscal and 4.1 per cent next year. He said he endorses the prediction made by IMF that India will achieve 8.8 per cent growth in 2010.
He also said that India is estimated to require $1 trillion in the next five years to create infrastructure for sustaining nine per cent plus growth. But it expects a funding gap of up to 30 per cent, which he wants American investors to bridge.
He said China’s decision to allow its currency, yuan, to appreciate against the US dollar will not hurt the Indian economy.
China ended its 23 month peg against the US dollar, which saw the Chinese currency rising more than 0.4 per cent against the US dollar — the biggest rise since 2005. It, however, fell 0.2 per cent on Tuesday after major Chinese banks bought dollar.
Yuan’s appreciation agai-nst the US dollar will inc-rease the purchasing power of the Chinese, alth-ough it would make imports costlier for the West. — PTI
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