‘I will be the first to admit that inflation has become a problem; there were reasons beyond our control’
Admitting that the government had “no control” over developments like the deteriorating world food situation and the sharp rise in oil and commodities prices in the international market, which led to inflation, Prime Minister Manmohan Singh, however, exuded confidence on Thursday that the overall inflation would come down to 7 per cent at the end of March on the back of steps being taken by the government.
“Food inflation has been a cause of concern. But recently, the situation has improved and we expect it to improve further,” Dr. Singh told the Lok Sabha while replying to the debate on the Presidential Address. “I will be the first one to admit that inflation in the last 18 months has become a problem. There were reasons beyond our control. First of all, there was the drought of 2009, and there were natural calamities which affected the production of important products such as vegetables and onions,” he said.
Dr. Singh said the government was in control of certain commodities and could handle the prices of these.
“As far as cereal prices are concerned, the fact that we have large accumulated public stocks with the Food Corporation of India and public procurement agencies, we have been able to stabilise prices of cereals, wheat and rice,” he said. There had been problems with regard to vegetables, meat and milk, Dr. Singh said, adding that some of these items were beyond the government's control.
“The government's policy is to ensure that we control inflation but in a manner by which we do not hurt the growth of employment opportunities. If we have a ham-handed approach, we could have killed the process which is the only source of providing jobs for our youth.”
A delicate balance had to be preserved between controlling inflation and protecting employment, he added.
“I think that this sometimes gives a feeling to the ordinary people that we are not worried about inflation. That is not the case. Our government stands committed to controlling inflation, and I am hopeful that at the end of this fiscal year, the rate of inflation, at least the headline inflation, will come down to about seven per cent,” Dr. Singh said.
He said that in the long run, in a country like India where agricultural prices were “kingpin of the price structure,” the only way “we can control inflation is through increased production and increased productivity of agriculture.”
He said the Centre was committed to bringing in the National Food Security Bill, which will expand the frontiers of the government's ability to control inflation.
Accepting that there were issues in the implementation of the government's flagship programmes, Dr. Singh said these needed to be revisited to plug the leakages.
In the Rajya Sabha, the Prime Minister made the same observations, and in addition mentioned the difficult global environment that was adding to economic management woes in India.
“Traditional developed economies are suffering from acute recession, if not depression, and this is compounded by rising fuel prices,” Dr. Singh said.