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Economy upbeat, but inflation a worry

The Economic Survey 2006-07 advises 'calibrated' measures to curb inflation.

business Updated: Feb 27, 2007 19:51 IST

The pre-budget Economic Survey on Tuesday expressed concern at rising prices and advised 'calibrated' measures to contain inflation while sustaining high growth - an indication that tomorrow's budget may continue the overall trend of moderating taxes.

Acknowledging buoyancy in all sectors of economy except for the slow growth in agriculture, the Survey tabled by Finance Minister P Chidambaram in Parliament said that the "economy appears to have decidedly taken off and moved from a phase of moderate growth to a new phase of high growth."

Projecting a 9.2 per cent GDP growth for 2006-07 on the back of 9 per cent growth in the previous year, it said achieving sustained high growth trajectory required careful consideration of 'sustainability of high growth with moderate inflation' and inclusive nature of such progress.

It squarely blamed the supply side shortages for the inflationary pressures, for which there were no immediate solutions, and said: "Poor agriculture performance, as the current year has demonstrated, can complicate maintenance of price stability with supply side problems in essential commodities of day to day consumption."

Lauding overall fiscal and financial performance, the Survey said that buoyancy in taxes would lead to overshooting of overall revenue targets but expenditure management was still an 'unfinished task' of fiscal consolidation.

It warned that the monetary policies aimed at containing inflation were also leading to hardening of interest rates.

Expressing concern over rising unemployment and poor social sector performance, the Survey asked the government to be more effective in critical areas such as education, health and support for the needy to achieve the target of "inclusive growth."