The Hindu Business Line : `Industry must stop raising prices arbitrarily'

New Delhi May 24 The Union Finance Minister, Mr P. Chidambaram, on Thursday reiterated his call to Indian industry to co-operate with the Government in its fight against inflation. He urged them to refrain from raising prices arbitrarily by taking advantage of the pricing power that has returned to them owing to demand-supply mismatch.

The Finance Minister had made a similar appeal during his post-budget interaction with the Indian industry this year, where he urged them to hold the price line to help the Government combat inflation.

Pricing Power

"Indian industry is working with near full capacity utilisation. Pricing power has returned and the industry is exercising it fully. We appeal to the industry not to exercise pricing power arbitrarily," Mr Chidambaram said at the annual conference of the Confederation of Indian Industry (CII) here.

The Finance Minister traced the persistent inflationary pressures to five factors. These include high global commodity and metal prices, high public expenditure, rising per capita incomes leading to excessive demand and mismatch of demand-supply.

Mr Chidambaram said that the Government was making efforts to increase supply of goods and moderate the demand.

"Wherever we can augment the supply, we are doing whatever is needed. And wherever we can moderate the demand, we are moderating the demand, and that is why the interest rates have increased in the last couple of months," he said.

Major Initiatives

Meanwhile, Mr Chidambaram also emphasised that services and industry should maintain double-digit growth rate to sustain economic growth of 8 to 9 per cent. "The growth in the agricultural sector in the Tenth Plan (2002-07) was abysmally low at 2.3 per cent. But now we are looking at a growth rate of 4 per cent. Along with this, if the services and industry sectors maintain a double-digit growth, then we will be able to sustain the overall economic growth of 8 to 9 per cent," he said.

He said that the fact that the country was witnessing high growth momentum showed that it was bringing social benefits for a larger section of the society and not for a handful of people. "High growth means more inclusiveness. If high growth is not inclusive, then low growth is even more not inclusive. It is imperative that the manufacturing sector expand output at a faster rate to sustain the current economic growth," Mr Chidambaram said.

On the surge in foreign investments, he said that nothing should be done to restrict these `copious flows', but instead there was a need for dexterously managing them.

Foreign Investment

He cited the examples of other countries like, China, which were managing much larger volumes of foreign capital.

"There are, of course, some problems associated with copious flow of foreign investment, but that cannot become a ground to reject foreign investment. We must learn to manage these inflows, but we must not do anything that will restrict investment — domestic and foreign and both private and public," he said.

To a question on why the All-India Council for Technical Education was coming down heavily on private educational providers in many cases, Mr Chidambaram said, "I don't think there is case for not setting standards and enforcing standards in the country."

He pointed out that there were number of third-rate teaching shops in the country masquerading as high-class educational institutions. "Somebody has to set standards, somebody has to apply standards. The point is if AICTE is not discharging its function, that's a separate issue. But you cannot say nobody should enforce standard in this country," he said.

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