Finance Minister Pranab Mukherjee on Saturday exuded confidence the the economy would soon break the double-digit growth barrier and said the stimulus measures will not be fully withdrawn until a robust recovery is achieved.
Mr. Mukherjee, however, remained concerned over high food inflation and the ambiguous nature of recovery in exports due to the uncertainty prevailing in the developed economies.
“...I feel the fundamentals of the economy are strong. The positives from our recent performance outweigh the negatives, so that one can hope to see the economy breaking the double-digit growth barrier in the very near future, which is essential for reducing poverty in the country,” Mr. Mukherjee said in his address to the 82nd AGM of FICCI.
The Finance Minister has partially rolled back stimulus sops in the Budget by hiking excise duties by two percentage points across the board, and enhancing tax rates on petroleum products.
On a roll-back of the emergency measures to prop up the economy, the Minister said: “I am committed to fiscal consolidation in the interest of the economy’s capacity to sustain growth in the medium to long term.
“But it can be fully effected when the recovery in private demand — both consumption and investment — is sufficiently robust,” Mr. Mukherjee said.
Investments have been the key growth driver in the past and will continue to be for at least another 10 years, Mr. Mukherjee said.
Suggesting diversification of the export market, he said, there are some concerns about sustaining the bounce-back seen in exports in November-December 2009 due to uncertainties about the recovery in the developed economies.
“Here again we need to re-look at our strategy. We need to diversify our export markets to recover some of the growth momentum,” he said.
The other concern for the economy is the certain persistence in the momentum of food prices, which has been in double digits for several months now, he said.
“On a year-on-year basis, the WPI headline inflation in December 2009 was 7.3 per cent but for the food items it was 19.8 per cent. Thus, unlike the first half of 2008-09 when global cost-push factors resulted in the WPI inflation touching nearly 13 per cent, with inflation in primary and manufactured products just below the overall average,” he said.
The upsurge in prices in the second half of 2009-10 has been confined mainly to food items only. The weekly food inflation for February 13 is around 17.58 per cent and that for fuel, power light and lubricants is 9.89 per cent, he said.
“A significant part of this inflation can be explained by supply side bottlenecks in some of the essential commodities, precipitated by the delayed and sub-normal south-west monsoons,” he added.