Interview Pranab Mukherjee | business | Hindustan Times
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Interview Pranab Mukherjee

Finance Minister Pranab Mukherjee has said inflation will continue to be a cause for worry. In an exclusive interview with Bloomberg News, he said the quality of growth is more important in India to tackle poverty.

business Updated: May 14, 2010 22:12 IST
Unni Krishnan

Finance Minister Pranab Mukherjee has said inflation will continue to be a cause for worry. In an exclusive interview with Bloomberg News, he said the quality of growth is more important in India to tackle poverty. Edited excerpts:

Do you see India overtaking China in the near future?
China is a little higher than us because their system is different...it is not exactly a comparable situation. Moreover, they are having sustained high growth rate from 1978 onwards. Our higher growth started in the early 90s...

I am quite confident that our trend growth will come back to 9-10 per cent. My worry is that I must sustain it over the next 5-10 years if I want to address basic problems of poverty, deprivation, illiteracy and backwardness. So inclusive, sustainable growth is a must...that means the quality of growth is very important in our economy.

Are you worried with signs of overheating, as the rebound has been quite dramatic?
One or two sectoral cases it may be...substantially, it is not because if you look at our growth process, it has been gradual. There has not been very much volatility. It is not 10 per cent and then suddenly coming down to 7.5 per cent. So I am sure the overheating which other economies face will not hit us.

Are we at any kind of risk from the European crisis?
Yes, there is an impact of contagion...what has happened, to my mind, is that even in a stable economy, high deficit with volatile capital flows can create a situation some of the countries in Europe are witnessing.

The two aspects that are very important to my mind are high fiscal deficit and volatility of capital flows. Therefore, we should draw lessons that we must contain our fiscal deficit.

That is why I moved along the path of fiscal consolidation in my budget. I was adviced by many economists that we could have taken the risk of higher deficit but we did not want to do that.

There is a shock that the Indian economy is facing and we shall have to face for some more time — and that is inflation. Inflation today is not merely confined to your domestic position or merely to the monetary policy or supply-demand imbalance. International commodity prices may upset your own domestic economy to a considerable extent. Therefore these aspects have an adverse impact on it.

Will the government consider taxing foreign capital flows?

I am not recommending any specific steps right now, I am watching the situation... appropriate action would be taken to ensure there is no rude shock from that side.

An interesting point is the kind of money being offered for 3G spectrum. Does it make it easier for you to meet the 5.5% fiscal deficit target? So far as the fiscal deficit target is concerned, I shall have to meet it. That is the Lakshman Rekha, which I cannot cross. I shall have to be within that. And surely from the 3G spectrum, the government will get over and above the Rs 35,000 crore I projected in my budget.