The Hindu Business Line : `Inflation rate of 4.68 pc tolerable'

Current scene
There is ample liquidity, according to Mr Chidambaram.
RBI absorbing large amounts of money through market stabilisation scheme and Liquidity Adjustment Facility.

New Delhi , July 21

The Finance Minister, Mr P. Chidambaram, said on Friday that an annual inflation rate of 4.68 per cent, as per the latest estimate for the week ended July 8, was "tolerable".

"For a country that is growing at 8 per cent for the third year in succession, it is inconceivable that there won't be some inflation," Mr Chidambaram told reporters here after a meeting with public sector bank chiefs.

According to him, the overall inflationary situation is "under control" and "there is no need to assume that prices will rise or there will be rise in interest rates".

Mr Chidambaram highlighted that there was ample liquidity and pointed out that the Reserve Bank of India (RBI) was absorbing large amounts of money through market stabilisation scheme (MSS) and Liquidity Adjustment Facility (LAF).

Stating that there was no reason for inflationary expectations, the Finance Minister said that both the Government and the RBI would take all necessary steps to keep inflation under control.

He, however, admitted that there was some "uncertainty" on the inflation front, but expressed hope that it would be resolved in the coming days and weeks. "We have taken a number of fiscal steps. We have taken steps on the supply side. The RBI Governor has taken steps from the monetary side," Mr Chidambaram added.

On credit growth, the Finance Minister said that the Chairmen of public sectors banks had told him that the performance in the current fiscal was "good". He pointed out that there has been over 30 per cent growth rate in credit in the recent years and that public sector banks have been asked to ensure adequate credit for all sections, especially the productive sectors of the economy.

On agricultural credit, Mr Chidambaram said the doubling of farm credit had been achieved in two years as against the targeted three years.

As on March 31, 2006, which is the end of the second year, total agricultural credit stood at Rs 1,67,000 crore (target was to touch Rs 1,60,000 crore in second year).

He also said that all banks had informed him that they had operationalised the decision of the Government that crop loans up to Rs 3 lakh would be given at 7 per cent interest for both kharif and rabi seasons.

Education loans

As regards education loans, the Minister said there had been a substantial expansion in the amount of loans provided by public sector banks in the last two years.

From an outstanding exposure of Rs 4,550 crore as on March 31, 2004, the education loans exposure had increased to Rs 6,713 crore as on March 31, 2005, and Rs 10,1004 crore as on March 31, 2006.