Just a day after the Opposition parties called for a ‘Bharat bandh,' moved cut motions and disrupted Parliament, all against the rising prices of essential commodities, petroleum products and fertilizers, Finance Minister Pranab Mukherjee has claimed that food inflation is softening.
“Indications of softening food inflation are clearly visible. There has been a significant decline from the peak food inflation of over 20 per cent recorded in December 2009 to 17.7 per cent in March 2010. The inflation in essential commodities also declined from the peak of 23.8 per cent in January 2010 to 19.8 per cent in March. It is expected that this decline would continue in the coming months uninterruptedly,” Mr. Mukherjee said.
The Minister — who moved the Finance Bill 2010-11 for the consideration of the Lok Sabha on Wednesday — referred to the measures taken by the government on the monetary side, like the increase in the Repo Rate from 5 per cent to 5.25 per cent, Reverse Repo Rate from 3.50 per cent to 3.75 per cent, and the Cash Reserve Ration from 5.75 per cent to 6 per cent. “These measures are expected to anchor the inflationary expectations,” he added.
Mr. Mukherjee said the turnaround of the economy, which started in the second quarter of 2009-10, was likely to result in a growth of 7.2 per cent for the full year of 2009-10 as indicated in the advance estimates of the central statistical organisation.
The salutary impact of the fiscal stimulus, along with the monetary measures, facilitated the growth of recovery by regenerating investment impulses and private spending. The economy was expected to grow around 8.5 per cent in 2010-11 and to breach the 9 per cent mark in 2011-12, he added.
On growth prospects, Mr. Mukherjee said the impressive recovery achieved by Indian industry in the recent months was heartening.
“The indices of industrial production, manufacturing and mining and electricity all witnessed growth…all the major segments of industry except consumer non-durables staged a strong recovery. All these are indicative of pick-up in investments,” he said.
The Minister referred to the partial roll-back of stimulus measures and resumption of fiscal consolidation process, with the fiscal deficit at 5.5 per cent of the GDP, initiated by him in 2010-11 Budget. The medium term fiscal policy statement 2010-11 provided the roadmap, with the fiscal deficit declining to 4.8 per cent of the GDP in 2011-12 and to 4.1 per cent in 2012-13.
Mr. Mukherjee said the government was firmly committed to comprehensive tax reform through the introduction of the Direct Taxes Code (DTC) as well as the Goods and Services Tax, adding that the consultation process for revising the first draft in the case of DTC was almost over.
He said the revised discussion paper could be expected in the public domain next month. After the quick round of consultations with some of the major stakeholders, the draft legislation may be tabled in Parliament in the monsoon session.