The Hindu : Business : ‘RBI to take steps to contain inflation’

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‘RBI to take steps to contain inflation’

Special Correspondent

Finance Minister inaugurates Large Tax Payer Unit in Mumbai

— Photo: Paul Noronha

GOING STRONG: P. Chidambaram (left), Union Finance Minister with Niraj Bajaj, President, Indian Merchants’ Chamber at the valedictory function of IMC’s ‘Centenary Celebrations’ held in Mumbai on Friday.

MUMBAI: Union Finance Minister P. Chidambaram on Friday said that ‘neglect of primary education, health care and gender equality issues through successive decades held back India’s progress in the past.’

Addressing the valedictory function of the Indian Merchant Chambers’ centenary celebrations here, Mr. Chidambaram said that he was encouraged by the record tax collections, which were expected to surpass even the Revised Estimates, which helped him pledge large amounts of money for the social sector.

Emphasising on the universal elementary education, Mr. Chidambaram said he had allocated Rs. 13,000 crore for the Sarva Shikhsa Abhiyaan in the recent budget, which is about ten times more allocation than the Rs. 1,309-crore allocated during 2003-04. Paying tributes to K. Kamaraj, who pioneered the Mid-Day Meal movement in Tamil Nadu, the Finance Minister said, over 13 crore children would be benefited by the Rs. 8,000-crore allocation made for the scheme during 2008-09. He also said that while Kamaraj had introduced the mid-day meal scheme, he found resources from the State Government alone.

Mr Chidambaram said his government’s primary focus was on human resources development, which played a critical role in helping to post 8 to 9 per cent economic growth. He said a National Skill Development Mission had been taken up on a public-private partnership basis, which would ensure availability of skilled manpower in large quantity in the coming years. The Finance Minister said that simple good economics would ensure sustained growth and he asserted that by 2025, India would be able to wipe out poverty, which was not possible for over 5,000 years till now.

Rising inflation

Mr. Chidambaram also said that the country had to strike a balance between growth and inflation. He said the inflation had touched 6.68 per cent and containing the price rise was the current priority. Terming inflation as a ‘regressive tax common for both the rich and the poor,’ the Finance minister said commodity prices had risen sharply all over the world, while metal prices had doubled or trebled. “Since we are importing most of the products, we are in fact importing inflation,” he added. According to Mr. Chidambaram, India has to increase its agricultural products, especially, wheat, rice, pulse and edible oil, to avoid import from other countries.

The Finance Minister also observed that the inflationary expectations leading to hoarding of commodities was also fuelling the price rise. Mr. Chidambaram said that he had put in place the fiscal measures to contain inflation and said the Reserve Bank of India would take appropriate monetary measures to ensure that the inflation did not hurt the economy. Against this backdrop, Mr. Chidambaram hinted that the economic growth during 2008-09 might somewhat slow down from the present 8.7 per cent.

Union Bank of India

Addressing a function organised by the Union Bank of India to announce its achievement of having covered all its branches under its core banking solutions network, offering anytime anywhere banking to all its customers, Mr. Chidambaram called upon bank managements to share their surging profits with the employees of the banks.

Earlier in the day Mr. Chidambaram said India had the most cost effective tax administration regime. Speaking after inaugurating the Large Tax Payer Unit (LTU) of the Department of Revenue here, Mr. Chidambaram said the cost of collection of tax is 60 paise per Rs 100, which is the lowest in the world. He further said that in the case of LTUs, where a small of large tax payers would be serviced, the cost of collection would fall dramatically to 4.5 paise per Rs. 100.

The Finance Minister said the LTU demonstrated an attitudinal shift in the tax administration policy and called upon corporates to avail themselves of the single window service, which will result in substantial transaction cost saving for the business houses.

He said, Mumbai, which accounts for nearly a third of direct tax collections, has potential for at least 150 large tax payers to join the LTU. 18 have so far signed up for the scheme.

He said LTUs were already in operation in Bangalore and Chennai. Another LTU will be open in Delhi in May and Kolkata towards the later part of this calendar year, he added.

LTU is a self contained single window unit administering both direct taxes and indirect taxes in respect of large business enterprises.

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