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The statistics given by Dr Arvind Virmani in his interview (Business Line, August 7) regarding the status of Indian economy beggars belief. He has stated that inflation is on account of rising edible oil, mineral oils and iron and steel prices. It is also due to the abnormal increases in the prices of important foodgrains such as wheat, rice and pulses witnessed in the last one year.

Again, the premise that inflation and the slowdown of the economy are due to overheating is not doubted. But overheating is a condition facilitated by the global fossil oil prices, the subsidy regime and increased money supply caused by the issue of oil bonds which got converted to cash to meet the growing expenses of the oil companies.

It is also stated that the capital stock increased by 75 per cent during the five-year period 2002-07. Such massive manufacturing sector growth is not reflected on the production and price fronts.

Further, not only domestic investments but also foreign capital inflows sustained the high growth rate witnessed in the five-year period, as evidenced by the massive increase in foreign exchange reserves.

P. Esakki Muthu, e-mail

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