The government desires that a balance needs to be struck between inflation and growth. I have so far taken fiscal steps and its now RBI to adopt monetary measures by use of different instruments. However, the supply side is a crucial issue and to address it I have allocated Rs 25,000 crore for the Rashtriya Krishi Vikas Yojana and Rs 4,8230 crore for the National Food Security Mission. We should be self sufficient or near self sufficient in wheat, rice, pulses, sugar and edible oil, he noted.Chidambaram was speaking at the centenary function of the Indian Merchants Chamber (IMC).
The finance minister informed that the inflation was surged to 6.68% for the week ended March 15 as against 5.92% the previous week. He questioned whether India would like to have a high growth rate with a moderate inflation or vice-versa.
Chidambaram explained that inflation was increasing not because of any policy mistakes but due to high global commodity prices and inflationary expectations.
The prices of iron ore, lead, zinc, nickel have doubled or trippled between 2004 and 2008. Similarly prices of rice, wheat, soyabean oil, palm oil have also followed a similar trend. If you are importing some of these goods you are importing inflation, he said.
The finance minister said that inflationary expectations were also contributing to a spurt in inflation. Some may say that interest rate is a blunt weapon which dampens growth but this is the most effective tool to curb inflation, he added. On the improvement of supply side, the minister opined that there was a dire need to improve public distribution system.
On the Indian GDP growth story, Chidambaram hoped that this quarter would also witness over 8% growth. Just three days to go, India will have over 8% growth for 13 successive quarter, he noted.
Chidambaram strongly defended the Rs 60,000 crore farm loan waiver and termed it as a bold and courageous decision. The government will provide Rs 40,000 crore in cash to banks in 14 months. Of which Rs 10,000 crore have already been paid while the balance Rs 15,000 crore would be paid in July this year and the balance Rs 15,000 crore in February 2009, he noted.