Addressing the AGM of Indian Banks Association here, Mukherjee said, “When there is uncertainty in the global market, particularly on those products for which we have to depend on imports, naturally it would affect.”
It may be noted that the wholesale price index, the main gauge of prices within the country rose 8.66 per cent annually in April and has been stubbornly high for months while the food price index rose 7.47 per cent and the fuel price index climbed 12.11 per cent in the year to May 7.
By constantly adjusting the policy both from the supply side and the demand side and by taking appropriate fiscal policies in tandem with the RBI, Mukherjee said: “We are trying to achieve high growth and acceptable levels of inflation.” While pointing out that RBI raised interest rates in early May for the ninth time since March 2010, by a sharper-than-expected 50 basis points, the Finance Minister said fighting inflation was its priority, even at the expense of some short-term growth.
RBI expects inflation to stay high in the first half of the fiscal year before easing, and ending the year at around 6 per cent. The other concern, Mukherjee continued, is to sustain the growth momentum in the medium to long term, which requires pursuing a path of fiscal prudence along with implementation of reforms that remain, including in the financial sector. The government is addressing these concerns, with the Union Budget 2011-12 taking major steps in that direction, he added.
He pointed out the services sector, contributing for 58 per cent of GDP, has become an important stabilising factor for the economy, which is now more globalised and exposed to global business cycles. “The large service sector is also helping us absorb domestic shocks and uncertainties associated with a monsoon-dependent agrarian economy.”
Mukherjee also said the agriculture diversification has added to its resilience in the face of uneven and delayed monsoons in the recent past. “The agriculture year 2010-11 should see production touch a new high,” he said.
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