Finance Minister Cautions Industry to Keep Inflation at Bay

Wednesday, January 17, 2007

At FICCI’s 79th annual general meeting in New Delhi last week, India’s Finance Minister P. Chidambaram warned industrialists to keep costs of manufacturing low in order to maintain prices. He expressed the view that “The economy could not afford even a 4% inflation rate, and it was the businessman’s responsibility not to hold back supply”. He was referring to artificial supply constraints being created to push up prices by a section of industry to make the most of the buoyant economy.

The Finance Minister justified his government’s move to hike interest rates on housing and real estate. Credit extended to the housing sector was growing at 54 % and at 102 % to commercial real estate. This policy of according high rates to areas where credit growth is increasing was to ensure economic stability.

The minister observed that volumes from the food products, leather, paper, chemicals and metals and machinery had declined of late, and this needed investigation.

The finance ministry proposes to set up a body to streamline implementation of infrastructure projects in the public and private sectors, and acknowledged the need for speedy completion of projects like the Delhi Metro and the Greenfield airport projects in Hyderabad and Bangalore.

Chidambaram had earlier shared the government’s plans to set up new financial instruments and institutions to channelise long-term NRI remittances at the Pravasi Bharatiya Divas. The government would also consider the possibility of tapping the NRI’s knowledge resource for the country’s growth.

Photo: 5B-3 – Sonar Taree II East – Bengal Peerless Housing Complex by Biswarup Ganguly, licensed under CC BY 3.0, via Wikimedia Commons.