“Headline inflation still high and perilously close to double digit”

Inflation would moderate to 6 to 7 per cent by March 2012 if the present trend continued, Union Finance Minister Pranab Mukherjee said here on Sunday.

“It is true that we are going through difficult times, not just in India, but all over the world,” he told journalists after a meeting with the Chief Ministers of southern States, Union Territories, and CEOs of public sector banks.

The country's GDP growth in the first quarter of 2011-12 was 7.7 per cent, and 6.9 per cent in the second quarter. In this context, “we are also facing problems,” he said.

Despite inflation rates being high in the manufacturing sector, fuel and some commodities, he said food inflation had come down. “If this trend continues, then inflation by March will be 6 to 7 per cent.”

“I do agree headline inflation is still high and perilously close to double digit inflation.” Japan, the United States and the European counties were also facing problems. As per latest assessment, there was no possibility of recovery of Eurozone, comprising 28 countries of the European Union, till the third quarter of the next calendar year. The U.S. economy was making a slow recovery, but “how long it will continue and how far is yet to be seen.”

“The growth rate in many emerging economies has declined and rate of inflation is high,” Mr. Mukherjee said.

Project delays

Expressing concern over delay in the execution of 14 major projects, for which banks had committed an investment of Rs. 39,424 crore in the southern region, he requested the Chief Ministers to pay personal attention to this aspect and review the status of approvals (relating to water, electricity, land and state-level environmental clearances, among others) in large projects in their States.

“Bank CMDs have been told to approach the State governments for expediting the approvals in projects financed by them.” Eighteen districts out of 156 in the seven States and UTs did not have any LIC branch and non-life insurance companies did not exist in four districts. “I have instructed LIC and non-life insurance companies to ensure that all districts have at least a branch or a satellite office in these districts in the coming year.”

Referring to the growth of the farm sector, Mr. Mukherjee said the target for agriculture credit flow was fixed at Rs. 4,75,000 crore, against which the banking system had extended a credit of Rs. 2,23,380 crore as on September 30.

For the southern States, the figure was Rs. 20,622 crore.

Directing the Chief Ministers to take up the issue of Kisan credit cards on a campaign mode, he requested them to make efforts to generate awareness on short-term crop loans, where credit was available at 4 per cent interest per annum.

On disbursal of educational loans, he said the performance of the south zone was as per all India average, but Andhra Pradesh, Karnataka and Kerala needed to improve their performance.

Of the 14,612 villages allotted under financial inclusion in southern States and UTs, 11,114 were covered by October end (76 per cent). The rest would be covered in the remaining months of this fiscal.

Chief Ministers D.V. Sadananda Gowda (Karnataka), N. Kiran Kumar Reddy (Andhra Pradesh), Oommen Chandy (Kerala) and N. Rangasamy (Puducherry), Tamil Nadu Finance Minister O. Panneerselvam and top officials from Andaman and Nicobar Islands and Lakshadweep attended the meeting.

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