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The Finance Minister, Mr Pranab Mukherjee, has said that increasing food inflation and slow industrial production are a matter of concern.
He said that people will have to learn to live with 6 to 7 per cent inflation.
This statement came minutes before the Reserve Bank of India cut the repo rate. Repo rate has been cut by 50 basis points after three years.
Addressing industry chamber CII’s annual conference, he said, "Food Inflation rose to 9 per cent which is a matter of concern. The Government is making all efforts to check it and we hope it will come down to 6-7 per cent. Though it is high but we will have to live with it."
Talking about industrial production growth, he said one of the reasons is tightening of the monetary policy. The RBI raised the rate 13 times in the last one year. Coupled with pressure on liquidity, industry was having great difficulty in taking their project forward.
Mr Mukherjee said that non-food credit came down to 15.4 per cent in February from 22.8 per cent a year ago.
Similarly, credit flow to industries came down from 26.5 per cent to 19.1 per cent. He, however, hoped that with slight moderation of overall inflation, one could see reversal of increasing the policy rates.
Talking specifically about crude oil prices, he said there is need to take corrective steps to minimise the impact of high prices in the international market. Crude oil price is still ruling above $115/barrel.
On doubts being raised on fiscal deficit target in the Budget, he assured that there will be no let up in expenditure. Target for capping the subsidy below 2 per cent of GDP will need to be achieved. "Budgetary exercise has been done with extreme care," he said.
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