— Photo: Kamal Narang

EXPLAINING BUDGET: Union Finance Minister P. Chidambaram making a point at an interaction with industrialists on the budget in New Delhi on Thursday. Among those in the audience are: CII president R. Seshasayee, Bharti Group chief Sunil Bharti Mittal , Bajaj Auto chief Rahul Bajaj and Hero Honda MD Pawan Kumar Munjal.

NEW DELHI: Finance Minister P. Chidambaram on Thursday asked India Inc. to hold the price line and help the Government rein in inflation, even as he defended the differential duty structure announced in the Union budget as a reward and punishment for cement companies.

Mr. Chidambaram hailed the captains of industry for bringing about a structural shift in the economy that could sustain the momentum for the next 10 years.

A day after presenting his budget, which evoked a mixed response from industries, the Minister commended the industry sector for playing catalyst in the higher economic growth.

Structural shift

In his customary post-budget interaction with top industry representatives here, he said the structural shift came about mainly because of industry and services. "A structural shift which can be reinforced, a structural shift which can be made permanent, a structural shift which can give us this high growth for 10 years as the East Asian economies demonstrated in late 1980s and China continues to demonstrate for the last six-seven years. It happened mainly because of the ladies and gentlemen gathered here and in similar chambers all over India."

Noting that the domestic industry had come of age and was scouting for acquisitions abroad, the Minister said: "I am quite happy to look at your top lines. Quarter after quarter, you are recording double-digit growth rate. There is huge demand in this country for product and services. People have money in their pockets, people are willing to spend."

However, as he expected yet another year of high growth during 2007-08, he appealed to industry to contain prices and help in fighting inflation.

Referring to the differential excise on cement, Mr. Chidambaram said the Government intended rewarding companies which held the price line while taxing those which sought to rake in huge profits in the wake of increasing demand.

"I am happy that most industries have not pushed up prices. But in cement, prices have gone beyond all reasonable limits. Therefore, we say, we will try to reward those having an inclination to hold the price line, but we will tax anyone using that opportunity [of huge demand] for making huge profit."

The Government received no cooperation from the cement sector although the companies, when cautioned, promised to cut prices. Although cement units were scattered all over India, competition in prices was non-existent in view of the transportation cost, which rendered cross-country sale uncompetitive. "I am sure [the] cement industry will hold a meeting with us, we will discuss with them and encourage them to hold the price line."

Inflation, Mr Chidambaram said, could be tackled in three ways — through fiscal measures such as duty cuts, monetary steps undertaken by the Reserve Bank of India and improved supply-side management.

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