By IANS,
New Delhi : Global factors are behind India’s current bout of inflation, Prime Minister Manmohan Singh said Tuesday, a week before his government seeks a vote of trust in parliament.
In an interaction with a group of editors at his 7 Race Course Road residence, Singh admitted curbing inflation and maintaining growth momentum were major challenges for his government.
“It’s not a typical inflation, it’s influenced by global factors,” Singh was reported by television channels as having said during his interaction, which was largely focussed on the India-US nuclear deal.
Indian equity markets ended at a 15-month low Tuesday following a 654-point drop in the Sensex, the benchmark index of the Bombay Stock Exchange. Banking, capital goods, metal and power stocks were the worst hit.
The markets started on a weak note and kept going down through the day. All the sectoral indices ended the day in the red.
An official press communiqué from the prime minister’s office said that at the interaction with the editors, Manmohan Singh “outlined the steps taken by the government to sustain the growth momentum and curb inflation, in the face of external pressures on account of rising crude oil prices.”
“He also referred to various initiatives taken by the government to make the growth process socially inclusive, including measures taken to insulate the poor to the extent possible from inflation,” the statement said.
Some of important measures taken by the government to rein in inflationary trends include the ban on export of non-basmati rice, upward revision of cash reserve ratio (CRR) and repo rate by the central Reserve Bank of India (RBI).
RBI June 24 had hiked the repo rate or the rate at which the apex bank lends money to banking institutions to 8.50 percent from 8 percent, and the CRR by 50 basis points to 8.75 percent from 8.25 percent.
The Prime Minister June 2 had expressed his government’s inability to allow the “subsidy bill to rise” and “fully insulate” the people from the impact of the world commodity price situation.
His statement at the annual session of Associated Chambers of Commerce and Industry (Assocham), a leading industry lobby, had been followed by an increase of diesel and petrol prices by Rs.3 and Rs.5 per litre respectively, while that of a cooking gas cylinder went up by Rs.50.
“We cannot allow the subsidy bill to rise any further. Nor do we have the margin to fully insulate the consumer from the impact of world commodity price and oil price inflation,” the prime minister had said in his speech.
India’s headline inflation during the week ended June 28 touched a 13-year high of 11.89 percent, while the growth rate of industrial production decelerated to a six-year low of 3.8 percent in May this year.
In view of soaring inflation, economists have expressed doubts if India would be able to log even an eight percent growth this fiscal as compared to 9 percent in 2007-08.