Finance minister Pranab Mukherjee on Monday said inflation poses a major challenge to the Indian economy and projected that the rate of inflation is going to be more than 6.5 % this year.
"There are problems (with the Indian economy) and one of the major problems is inflation," Mukherjee said, addressing a meeting of India and American corporate leaders, think tank members and policymakers at a conference on the 'US-India Economic and Financial Partnership' jointly organised by the Confederation of Indian Industry (CII) and Brookings Institute, a Washington-based think tank.
"Inflationary pressure is putting a serious constraint," said the finance minister, who arrived in Washington on Monday leading a high powered Indian delegation for the second India-US Economic and Financial Partnership discussions being held in Washington.
"We do not believe, in theory, one is to be dispensed for the other. Yes, we can have a moderate rate of inflation and at the same time, reasonable developed growth. The monetary and fiscal policy must move in tandem. In India, we are doing so," he said.
"Therefore, in short term, I would like to emphasis that in India, the growth potential is there. The rate of saving and rate of investment is reasonably high. The various structural reforms which we have undertaken and which will come in course of time, that will ensure that investment-friendly environment which can attract investment from various parts of the world," he said.