The Hindu Business Line : Govt to curb borrowings, keep inflation under control

The Finance Minister, Mr P. Chidambaram, and the President of Bombay Chamber of Commerce & Industry, Mr Ashwini Kakkar, at the 169th AGM of the chamber in Mumbai on Tuesday. - Paul Noronha

Mumbai , May 24

THE Finance Minister, Mr P. Chidambaram, today said the Government intends to keep inflation under control and interest rates benign to promote growth and also strive to keep its borrowings lower than estimates.

He said the Government's borrowing was a cause for concern but it would try to borrow lower than its projections during the current fiscal.

"There is pressure on inflation because of oil prices and money supply. There is pressure on interest rates because of huge government borrowing. There is pressure on investible resources because large number of people still have no confidence in the capital market," Mr Chidambaram told members of Bombay Chamber of Commerce and Industry at its 169th annual general meeting.

Interest rates are inextricably linked to inflation.

"When interest rates move up investments are postponed," he said, adding that the Government had struggled to keep inflation down last fiscal.

`Keep prices steady'

He also urged the corporate sector to contribute its bit in keeping inflation down by maintaining prices constant for as long as possible. He asked the manufacturing industry to resort to cost reduction measures, infuse new technology and upgrade factories to avoid going in for an upward price revision.

"A short-term temptation to increase prices to improve profits can damage the economy long-term. Once prices go up interest rates will also go up," he said.

During the last fiscal, non-food credit offtake witnessed the highest expansion in 10-15 years. Credit offtake this year would be as good as last year if inflation is kept under control.

Mr Chidambaram said the country would see another year of investments, creation of jobs, and growth in exports. "This would be one more step in being counted as an economic superpower," he said.

Investments are necessary for sustained growth. Yet, at the same time, the entrepreneurial class should accommodate the poor and work in conjunction with the local elected government, he said.

He also urged the Bombay Chamber of Commerce & Industry to set up facilitation centres for large and small taxpayers for easier tax compliance. These centres should not be set up on government premises, he said. "Tax rates in India are moderate and it is the Government's intention to make tax administration friendly and tax enforcement strict," he said.

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