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No definite correlation between growth and inflation: Govt

New Delhi, May 5, 2013 (PTI)
File image Reuters

Allaying apprehensions that when the country's economy enters the growth trajectory of over 7 per cent it will lead to higher inflation, the government has said there need not be a correlation between the two.

"...high growth of GDP of 9.3 per cent and 8.6 per cent in the years 2007-08 and 2009-10, respectively have been witnessed with lower rate of inflation," Planning Minister Rajeev Shukla has said in a written reply to the Rajya Sabha.

"Therefore it in not necessary that if the growth rate of GDP is beyond 7 per cent, the rate of inflation will also rise," he added.

The minister was replying to a question asked by Deputy Leader of BJP in the Rajya Sabha, Ravi Shankar Prasad.

He asked: "Whether it is a fact that with annual growth rate of GDP going beyond 7 per cent, the rate of inflation in the country is also apprehended to rise?"

The minister's statement revealed that the inflation was 4.74 per cent in 2007-08, when economy grew at a rate of 9.3 per cent. Also, the rate of price rise based on Wholesale Price Index was 3.8 per cent in 2009-10 when GDP grew at 8.6 per cent.
However, the statement also revealed that inflation was 9.56 per cent in 2010-11, when the economy grew by 9.3 per cent; and 8.05 per cent in 2008-09, when the economy grew at 6.7 per cent.

Further, the inflation was 8.94 per cent in 2011-12 when economy grew at 6.2 per cent, and 7.35 per cent when the GDP expanded at 5 per cent.

The minister also said: "The increase in the rate of inflation does affect the lives of the majority of the people by reducing the purchasing power.

"The government and Reserve Bank of India have undertaken several fiscal, administrative and monetary measures in order to control inflation. As a result of these measures, the rate of inflation (WPI) has declined to 5.96 per cent in March 2013, the lower level in the last three years."


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