“Options today are much more limited. The options for fiscal steps as well as monetary measures are increasingly becoming limited. Innovative remedies would be required to address these challenges simultaneously,” finance minister Pranab Mukherjee said at the Delhi Economics Conclave
New Delhi: With policymakers running out of fiscal and monetary tools to deal with the economic slowdown and high inflation, finance minister Pranab Mukherjee today called for “innovative remedies” to deal with these challenges simultaneously, reports PTI.
“Options today are much more limited. The options for fiscal steps as well as monetary measures are increasingly becoming limited. However, there is potential for policymaking in other areas,” he said at the Delhi Economics Conclave.
“Innovative remedies would be required to address these challenges simultaneously,” he suggested.
Admitting that the fight against inflation and tight monetary policy regime were hurting growth and investment, the minister said the “slowdown in industrial growth is of a particular concern, as it impacts employment”.
In addition, inflation is at an unacceptable level and “there are also immediate concerns relating to fiscal deficit and current account deficit”, he said.
India is likely to clock GDP (gross domestic product) growth of around 7.5% this fiscal, as against 8.5% in the previous year.
India Inc has been complaining that the tight monetary stance of the Reserve Bank of India (RBI) is impacting investment and industrial growth.
All eyes are now on the RBI’s scheduled review of the monetary policy tomorrow. It has hiked interest rates 13 times since March 2010 in its bid to tame inflation.
Mr Mukherjee said, “Slowdown in industrial growth is of a particular concern as it impacts employment. Inflation is at an unacceptable level, there are also immediate concerns relating to fiscal deficit and current account deficit.”
In 2008, the government had provided a fiscal stimulus worth Rs1.86 lakh crore, or 3% of the GDP, to cushion industry against the adverse impact of the global slowdown.
With the fiscal deficit widening amid a slowdown of the economy in the current year, the government would find it very difficult to come out with another stimulus package to deal with the slowdown in economic activity.
Asking for opposition support in the implementation of key economic reforms, the finance minister said the government has sought to unblock economic bottlenecks in recent months through various initiatives such as the National Manufacturing Policy, increased FDI in retail and other financial sector legislations.
“We do hope greater consensus on these issues would help speed up their implementation,” he said.
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The fall in food inflation comes as a silver lining for the government at a time when the economy is experiencing a slowdown, with GDP growth dipping to 6.9% in the second quarter and industrial output shrinking by 5.1% in October
New Delhi: Food inflation fell to a nearly four-year low of 4.35% during the week ended 3rd December, reflecting a decline in prices of essential items like vegetables, onions, potatoes and wheat, reports PTI.
This is the lowest rate of food inflation since the week ended 23 February 2008, when it stood at 4.28%.
Food inflation, as measured by the Wholesale Price Index (WPI), stood at 6.6% in the previous week. It was recorded at 10.78% in the corresponding period last year.
Experts feel the moderation in the rate of price rise of food items below the psychological 5% mark will bring relief to the government, which has been battling high inflation for almost two years now.
According to data released by the government today, onions became cheaper by 46.03% year-on-year during the week under review, while potato prices were down by 33.28%. Prices of wheat also fell by 4.43%.
Overall, vegetables became cheaper by 12.28%.
However, other food products grew more expensive on an annual basis, led by protein-based items. Pulses became 11.76% costlier during the week under review, while milk grew dearer by 11.08% and eggs, meat and fish by 9.26%.
Fruits also became 9.37% more expensive on an annual basis, while cereal prices were up by 1.85%.
Inflation in the overall primary articles category stood at 5.48% during the week ended 3rd December against 6.92% in the previous week. Primary articles have over 20% weight in the wholesale price index.
Inflation in the non-food segment, which includes fibres and oilseeds, was recorded at 2.12% during the week under review, as against 1.37% in the week ended 26th November.
Fuel and power inflation stood at 15.24% during the week ended 3rd December compared to 15.53% in the previous week.
The decline in the rate of price rise in food items, which was in double digits till early November, is likely to give some relief to the government and the Reserve Bank of India (RBI), which have been facing flak from all quarters for persistently high prices.
On Wednesday, chief economic adviser Kaushik Basu had expressed hope that food inflation may fall below 3% in a month’s time.
The fall in food inflation comes as a silver lining for the government at a time when the economy is experiencing a slowdown, with GDP growth dipping to 6.9% in the second quarter, the lowest rate of expansion in over two years.
Industrial production has also witnessed a contraction, with output shrinking by 5.1% in October.
Headline inflation, which also factors in manufactured items, has been above the 9% mark since December 2010. It stood at 9.11% in November this year.
The RBI has hiked interest rates 13 times since March 2010 to tame demand and curb inflation.
In its second quarterly review of the monetary policy last month, the central bank had said it expects inflation to remain elevated till December on account of the demand-supply mismatch before moderating to 7% by March, 2012.