India to sustain growth despite challenges PM
Tuesday, 03 June 2008

REUTERS, NEW DELHI  - India will be able to sustain high economic growth despite challenges, Prime Minister Manmohan Singh said on Monday, and the government's aim was to contain inflationary expectations without hurting expansion.

Singh, who was speaking at an annual meeting of a leading industry lobby group, also urged a wider political consensus in favour of sustainable policies, adding the government could not afford to let its subsidy bill rise unchecked.

As ministers debate how best to bail out state-run fuel retailers and refiners facing huge losses due to the surge in crude prices, he said it was essential to allow "economic pricing" of scarce natural resources, especially oil.

"To ensure stability and sustainability of the growth process we have to follow more prudent fiscal policies," Singh said.

Indian policymakers were expected to agree on a package for oil firms -- including a moderate rise in prices of petrol and diesel -- at the weekend, but their efforts have been complicated by fears of upsetting voters in an important election year.

The oil ministry has suggested price rises of 15-20 percent and officials have described a hike as "inevitable", but any increase is likely to be far lower given the potential fall out for the ruling Congress Party-led coalition and inflation fears.

India currently issues bonds to state oil firms -- which have to sell fuel at below cost, government-set rates -- to partly offset their losses, while upstream companies share the burden.

"We cannot allow the subsidy bill to rise any further nor do we have the margin to fully insulate the consumer from the impact of world commodity prices and oil price inflation," Singh said.

"Economic pricing of scarce natural resources, be it water or be it oil, is essential for the sustainability of our growth process."

The prime minister said policies adopted by the government to tame inflation would yield results.

"It has been our endeavour to tame inflationary expectations without hurting the rhythm of the growth process and also to protect the weaker sections against rising prices," he said.

"I am confident that the mix of policies we have adopted will yield results once the full impact of a normal monsoon is felt."

India's widely watched wholesale price inflation rose an annual 8.1 percent in mid-May, stoking talk of action from the central bank to calm prices.

The Indian economy, Asia's third-largest, grew 9.0 percent in 2007/08 and the central bank estimates it will expand 8-8.5 percent in the fiscal year ending March 2009.

"I am confident the Indian economy will be able to grow at 8-9 percent and India will emerge as one of the growth engines for the world economy," Singh said.

"I am confident that India will continue to be at the top globally, among the world's fastest growing economies, characterised by moderate inflation and exchange rate stability."

Comments Add New
Write comment
  We don't publish your mail. See privacy policy.
Please input the anti-spam code that you can read in the image.