By IANS,
New Delhi : For a country getting ready for an imminent hike in fuel prices, Friday brought a mixed bag of news for its policy makers with economic growth tweaked higher to 9 percent for 2007-08, but inflation breaching the 8 percent mark to its steepest levels in three-and-a-half years.
The most worrisome news was data on the official wholesale price index that put India’s annual rate of inflation at 8.1 percent for the week ended May 17, from 7.32 percent for the week before.
But there was some positive news as well, as the government said India’s gross domestic product (GDP) actually grew nine percent during 2007-08, as against 8.7 percent reported earlier.
For the average citizen, it is ballooning prices that is now a matter of concern even as Prime Minister Manmohan Singh himself held several meetings with his key cabinet colleagues on the impending hike in fuel prices and to finalise a package to bail out state-run companies who are having to retail fuel at below cost.
“Nobody has drawn any great satisfaction at 8.1 percent inflation,” said Finance Minister P. Chidambaram, releasing the growth and inflation data. “This 8.1 percent is a worrisome inflation,” he told reporters here.
“We are confident that we will gain mastery over inflation and inflation will be contained over some time. However, moderation depends on global crude oil and commodity prices. Surely, we are still in full control over the situation.”
He also said any hike in prices of transport fuels would have a moderate impact on inflation, even as sources in the petroleum ministry said a moderate hike of between Rs.2 and Rs.5 in prices of diesel and gasoline was being contemplated.
The government last allowed prices of transport fuels to be hiked in February and the current level of crude oil prices that have topped $135 per barrel and currently rule at around $126, has been pushing state-run oil firms further into the red.
But Left parties have decided to oppose any hike, with Communist Party of India-Marxist (CPI-M) leader Sitaram Yechury saying higher fuel prices will be a “very cruel” burden on the people since they are already facing high inflation.
“It is a fact international crude prices are rising. We completely sympathise with oil companies, since they are the ones who are taking a beating. But what is the solution? Not a price hike,” he told reporters.
Nevertheless, there was some positive signs on the economy as well, as the GDP growth stood revised to 9 percent for 2007-07, as against 9.4 percent and 9.6 percent in the two years before that.
“Despite rise in commodity and oil prices, financial turbulence and meltdown of some global financial institutions, India has been able to grow at 9 percent for the third year running,” the finance minister said.
He admitted that the slower growth in the manufacturing sector was a matter of concern, but said corrective measures were being taken and more would follow to arrest the slowdown.
The Confederation of Indian Industry (CII) said the moderation in industrial growth was mainly due to a tight monetary policy, resulting in hardening of interest rate.
“The impact has been severe on industrial production especially on consumer durables sector,” the industry chamber said in a statement, even as the finance minister said solutions would be found.
“We will address why there is a slowdown in manufacturing. We have to take some corrective measures and we will take those corrective measures,” he said as the industrial growth was revised downward to 8.8 percent from 9.4 percent earlier.
“The fall in manufacturing sector from double digit for last two years to single digit is very disappointing and is a huge area of concern that requires inquiry and immediate attention from both government and industry bodies,” he said.
“On positive side, our per capita income has grown by 7.8 percent, which is not a mean achievement. The road ahead is difficult still I am confident that India can sustain its GDP growth for next twenty years,” he said.