Concerned over recent rise in prices, Prime Minister Manmohan Singh on Friday said his government is taking "determined measures" to control inflation but cautioned against steps that can hurt growth which must go up to 10 per cent.
Addressing the nation from the ramparts of historic Red Fort on 62nd Independence Day, the Prime Minister said while the country has emerged among the fastest growing economies, it faces a new challenge of inflation.
"I know how much each one of you is concerned about the recent rise in prices. The inflation we have seen this year is basically due to external factors. All over the world and in global markets the price of food, fuel and other commodities has been rising... We are taking determined measures to bring prices under reasonable control," Singh said.
He, however, cautioned that while making efforts to control inflation no step should be taken which hurts economic growth.
"Our economy must grow at the rate of at least 10 per cent every year to get rid of poverty and generate employment for all," he said.
For the first time, India had four years of nearly nine per cent economic growth. However, the main challenge before the UPA government is runaway rise in prices, with inflation touching 12.44 per cent for the week ended August 2.
Singh said he has sought cooperation from the states to tackle inflation. "I have urged all Chief Ministers to improve and strengthen the Public Distribution System (PDS) to ensure availability of essential commodities to the common man at reasonable prices," he added.
The Reserve Bank is also moderating the growth of money supply. The central bank has taken steps that included hiking key lending rates to nine per cent and sucking out the liquidity by increasing Cash Reserve Ratio for the commercial banks nine per cent.
Pointing out that in many developing countries inflation is double of the rate of price rise in India, Singh said the government has taken special measures to "insulate the poorer sections of society from the full impact of rising food and fuel prices."
At the same time the Prime Minister underlined the importance of growth for fighting poverty and employment generation.
He said a growing economy would need energy which should come from clean and environment friendly sources. "All over the world there is growing realisation of the importance of atomic energy to meet the challenge of energy security and climate change.
"It is a clean, environmental friendly and renewable source of energy," he said.
India recently obtained crucial go-ahead from International Atomic Energy Agency for implementing a civil nuclear deal with the US which will pave way for nuclear commerce.
Stressing that the government has given a "new deal to rural India", Singh said the stagnation in agriculture, especially from 1998-2004 (the period of NDA rule) has given way to revival of the farm sector.
"After almost a decade of stagnation, especially from 1998 to 2004, investment in agriculture is increasing and there has been a revival in this area," he said.
The country had a record production of foodgrain, cotton and sugar in 2007-08. While the foodgrain production is put at 230.67 million tonne by the fourth advance estimate for the period, cotton output is estimated at 25.81 million bales and sugar production is calculated at 22 million tonne.
"Our farms are once again green. Our godowns are once again filling up. Our farmers are once again hopeful about their future and their welfare," Singh said.
The Prime Minister said his government has gone beyond the recommendations of Sixth Pay Commission to hike salaries and emoluments of the government employees.
He said India's agriculture economy has been turned around because of increased investments in rural areas and by reducing the debt burden of farmers.
"In the past four years, we have increased bank credit for agricultural sector from Rs 81,000 crore to Rs 2,25,000 crore and have reduced the interest rates for farm loans."
The government has also waived bank loans to farmers to the tune of Rs 71,000 crore. Besides, it is investing Rs 25,000 crore through the Rashtriya Krishi Vikas Yojna in the farm sector.
Underscoring the importance of employment generation, Singh said the country needs more investment in manufacturing and infrastructure. If people in rural areas face adverse impact because of industrial development, the government would ensure a reasonable compensation and rehabilitation for them.
"A new Rehabilitation and Resettlement (R and R) policy has been formulated and we will seek Parliament's approval for it," he said.
For providing social security to workers in the unorganised sector, government has initiated various schemes like Aam Admi Bima Yojna and Indira Gandhi Pension Scheme for citizens of above 65 years.