The Hindu : Business : Chidambaram presents report card on economic performance

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Friday, May 27, 2005

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Chidambaram presents report card on economic performance

Special Correspondent

Outlines five-point recipe for attaining seven per cent growth

— Photo: Anu Pushkarna

DERIVING COMFORT: The Union Finance Minister, P. Chidambaram, coming out of the Prime Minister's office after a Cabinet meeting at South Block in New Delhi on Thursday.

NEW DELHI: The Union Finance Minister, P. Chidambaram, on Thursday projected an overall economic growth of seven per cent in 2005-06 while holding the promise to keep inflation under check along with low interest rates.

Presenting the United Progressive Alliance (UPA) Government's report card on economic performance during its one-year tenure at a news conference here, Mr. Chidambaram said: "We have managed to contain inflation at moderate levels. Interest rates are benign and the gross domestic product (GDP) is expected to grow by about seven per cent this fiscal."

The Finance Minister's forecast is in keeping with the Reserve Bank of India (RBI) and the Asian Development Bank's (ADB) identical projections of a GDP growth of seven per cent in the current fiscal, while the International Monetary Fund (IMF) pegged it a tad lower at 6.7 per cent.

A seven per cent growth this fiscal would be impressive, coming as it would after a "respectable" 6.9 per cent growth estimated for the previous fiscal which is on the back of a 8.5 per cent growth in 2003-04.

With normal monsoon expected this year, Mr. Chidambaram said a three per cent growth was likely in agriculture while manufacturing and the services sector would continue to perform well.

Outlining a five-point recipe for attaining the seven per cent growth, he said "investment growth has to be sustained, infrastructure improved, fiscal and revenue deficit curtailed, inflation curbed and interest rates kept benign."

On the issue of trade deficit, Mr. Chidambaram said although the gap was widening, the balance of payments (BoP) situation was not vulnerable as the foreign exchange reserves position was comfortable and continued to surge.

However, as net invisibles were unable to match up to the trade gap, the current account deficit had to be made good on the capital account through larger inflows of foreign direct investment (FDI).

That the position is comfortable was also corroborated by various international credit rating agencies which have upgraded their investment ratings for India, which was a reflection of the growing confidence in the Indian economy, he said.

Turning to inflation, Mr. Chidambaram maintained that the Government had been able to hold the price line through fiscal and monetary measures after the rate of inflation peaked to 8.7 per cent in August last year.

"After reaching 8.7 per cent in late August 2004, the point-to-point wholesale price index (WPI) inflation came down to five per cent in March 2005. Headline inflation increased because of hike in global oil prices and some metals such as steel," he said.

Reeling out financial data with the help of a powerpoint presentation, Mr. Chidambaram noted that in infrastructure, the progress made in the last one year in sectors such as telecom, roads, ports, civil aviation and to a certain extent in steel and power, have been "success stories." Holding them back had been the shortage of coal and so, the next major reform would be in coal sector, he said.

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