The Hindu Business Line : Adjust policies to tame inflation: Chidambaram

Cutting ice: The Union Finance Minister, Mr P. Chidambaram, with the Iceland Finance Minister, Mr Arni Mathiesen, at a meet in the Capital on Friday. —

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New Delhi, Nov. 23 The Finance Minister, Mr P Chidambaram, has said that India needs to adjust policies to ensure that the rise in the global crude and food prices does not adversely affect domestic inflation.

“Universally there is a concern for inflation which is mainly driven by high oil, commodity and food prices. Oil prices have risen to new heights and it is expected to rise further. We need to factor in these price increases and adjust policies so that inflation does not get out of control,” Mr Chidambaram said while speaking at an interactive meeting with the Finance Minister of Iceland, Mr Arni Mathiesen.

Economic growth

The Finance Minister also said that the Indian economy was likely to grow close to nine per cent by the end of the current financial year. This is higher that the RBI’s projection of a 8.5 per cent growth in the gross domestic product (GDP).

“India has grown at an average of 8.6 per cent in the last four years and we have to grow no less than 8.6 per cent if we have to maintain this growth. But I am confident that we will grow close to nine per cent this fiscal,” he said.

Stating that the country’s highest priority was infrastructure, he said that massive investments have been planned in the sector during the 11th Plan. According to him, the existing infrastructure was good to support a growth rate of five to six per cent but not eight to nine per cent.

“In order to address this issue we have envisaged an investment of around $475 billion in the next five years. Much of this money will come from domestic sources, but close to $130 billion would be raised from foreign investors,” Mr Chidambaram said.

“In the last few months we have witnessed large rush of capital inflows, which is a new situation for us, but I am confident we will gain mastery over them,” he said.

“India cannot afford the shocks and major turbulences in our financial and capital markets. We have proved to the world that India has been right in opening its markets in a calibrated and cautious manner.”

He, however, added that India was on course to open up the financial and capital market over a period of time.