Friday, December 23, 2011

All is not well in economic front

Meeting of PM Council of T&I:All is not well in economic front:
Prime Minister Manmohan Singh on Thursday hit out at industry leaders for their "negative comments" on government policies, saying it has "added to the uncertainty" but admitted that evolving of consensus on issues takes longer than desired due to coalition politics.
Amidst the talk of policy paralysis in the government, he asserted the government was committed to creating a growth oriented economic environment.

US growth has continued to be sluggish. In the near future we cannot hope to see the same growth impulses from the West as we saw prior to the meltdown," he said.
"I must confess that it is a little disappointing to sometimes hear negative comments emanating from our business leadership or be told that government`s policies are causing slowdown and pessimism in the industrial sector, Dr. Singh said.
"Such comments have added to uncertainty and have emboldened those who have no stake in our economic growth," Singh said at the meeting of the PM council of Trade and Industry.
Admitting that the meeting is taking place under difficult circumstances, he said the external environment poses significant challenges.
"We face the continued possibility of a potentially severe crisis in the Eurozone.
Coupled with this are issues of international food price volatility and the increase in oil prices are there.
The situation on the domestic front is equally a matter of concern, Singh said, adding that the persistent high inflation for some time now is unacceptable.
"We have to steer the economy back to the path of fiscal consolidation," Singh said in his opening remarks.
Corporate honchos who participated in the meeting included Narayana Murthy, Rahul Bajaj, Mukesh Ambani, Ratan Tata, Sunil Mittal, Deepak Parekh, Jamshyd Godrej, Chanda Kochhar and Sunil Kant Munjal.

Dr. Singh said: "We have seen some easing of inflation in the last few weeks and if this is sustained, I expect that the RBI will be able to ease up on monetary tightening as well."

He said that with the policy focus on improving agricultural production and productivity, Indian economy would soon be able to step up the production of food articles, thereby controlling inflation in these products.

Dr. Singh said he is aware of the industry concern about the high interest rate which is affecting investment plans.

"In order to curb inflationary pressures some reduction in aggregate demand was essential," he said.

Expressing concern over the sharp depreciation of the rupee, Dr. Singh said the government is watching the situation very closely and "will take whatever steps are necessary to prevent wild fluctuations".
However, the exchange rate depreciation increases the profitability of exports and Indian industry should take advantage of this development, he added.
On the industry concerns with regard to domestic policy, Dr. Singh said: "...every major government decision has to be negotiated in the larger democratic arena. This is especially true of sensitive issues like those related to acquisition of land and environmental concerns
On such issues, he said that the industry and the government will have to work together to find solutions that are fair and equitable.
" a democratic polity like ours and in the era of coalition politics, it often becomes necessary for the government to build a broad consensus on major public policy issues. This may sometimes take longer than what we would like. But our direction and objectives are clear," Dr. Singh said.
"We have to combat the potential impact of the global crisis and overcome the infrastructure implementation problems at home. I look forward to your suggestions on these aspects of economic management," he added.

Meanwhile, an official statement said that most business leaders expressed the confidence in the fundamental strength of the Indian economy.

"Many them informed the Council of their plans to invest heavily in new projects and stressed the need to expedite ongoing infrastructure projects," it said.

Minister of Environment and Forests Jayanthi Natarajan assured the business leaders that her ministry was committed to clarity, consistency, transparency and time bound environmental clearances for industry projects.

"The industry leaders were assured that a mechanism would be put in place for sorting out bottlenecks in implementing large projects," it added.

From the government side, besides Natarajan, Commerce and Industry Minister Anand Sharma, along with Planning Commission Deputy Chairman Montek Singh Ahluwalia and PMEAC Chairman C Rangarajan took part in the discussions.

Food inflation plunges to 4-year low of 1.81 pc

Food inflation fell sharply to a near four-year low of 1.81 per cent for the week ended 10th December as prices of essential items like vegetables, onion, potato and wheat declined.

This is the lowest rate of food inflation since the week ended 9th February, 2008, when it stood at 2.26 per cent.

Food inflation, as measured by Wholesale Price Index (WPI), was 4.35 per cent in the previous week. It had stood at 13.22 per cent in the corresponding week of 2010.

According to the official data released on Thursday, onion became cheaper by 49.38 per cent year-on-year during the week under review, while potato prices were down by 34.39 per cent.

Prices of wheat also fell by 4.21 per cent.

Overall, vegetables became cheaper by 26.37 per cent.

Experts feel the sharp fall in food inflation numbers, which was in double-digit till the first week of November, comes as a big relief to both the government and the Reserve Bank who have been battling high prices for over two years.

However, other food products grew more expensive on an annual basis, led by protein-based items.

Pulses became 14.22 per cent costlier during the week under review, while milk grew dearer by 11.19 per cent and eggs, meat and fish by 9.25 per cent.

Fruits also became 8.89 per cent more expensive on an annual basis, while cereal prices were up by 1.68 per cent.

Inflation in the overall primary articles category stood at 3.78 per cent during the week ended 10th December, as against 5.48 per cent in the previous week.

Primary articles have over 20 per cent weight in the wholesale price index.

Inflation in the non-food segment, which includes fibres and oilseeds, was recorded at 1.37 per cent during the week under review, as against 2.12 per cent in the week ended 3rd December.

Fuel and power inflation stood at 15.24 per cent during the week ended 10th December, same as in the previous week.

Headline inflation, which also factors in manufactured items, has been above the 9 per cent-mark since December, 2010.

It stood at 9.11 per cent in November this year.

The RBI has hiked interest rates 13 times since March, 2010, to tame demand and curb inflation.

In its second quarterly review of the monetary policy last month, the central bank had said it expects inflation to remain elevated till December on account of the demand-supply mismatch before moderating to 7 per cent by March, 2012.

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