Prime Minister Manmohan Singh on Tuesday called for strengthening "surveillance" of multilateral institutions to avert the crisis triggered by the global financial meltdown and stressed that it will not have any significant impact on India's economic health.
"We need to strengthen multilateral surveillance for free market economies to function properly. For that multilateral institutions need to be strengthened," the prime minister told reporters on board his special aircraft on way to New York.
He will discuss global economic issues when he meets World Bank president Robert Zoellick in New York on Wednesday.
Planning Commission Deputy Chairman Montek Singh Ahluwalia stressed that India's strong economic fundamentals will insulate it from the global financial crisis and underlined that the government was hopeful of bringing inflation down to single digit level by March next year.
"Inflation is not something which we can bring under control immediately. Fortunately, the tendency of constant increase (inflation) has disappeared," Ahluwalia told reporters in an interaction.
"I expect inflation to come down to single digit before the end of the financial year (that ends March 2009)."
Ahluwalia is part of Prime Minister Manmohan Singh's official delegation accompanying him on his five-day visit to the US.
India's annual rate of inflation is currently hovering around 12 percent. Inflation is set to be a major issue in the Lok Sabha elections due early next year with the opposition Bharatiya Janata Party (BJP) targeting the United Progressive Alliance's "incompetence" over the rising prices that has also hit large sections of the 300-million strong Indian middle class.
Political observers feel that inflation, rather than the much-touted India-US nuclear deal, could decide the fate of the government if soaring inflation is not curbed soon.
The deputy chairman suggested that the government should move towards monitoring inflation in terms of consumer price index rather than the current practice of measuring inflation in wholesale price index.
He said the international commodity prices including that of oil would soften in the days to come.
Playing down fears of the downturn in global economy impacting India, he said: "The Indian banking system is not directly related to it. The estimated exposure is very small and a direct impact almost negligible."
The large foreign exchange reserves will help India to tide over a temporary economic downturn, he said. High savings rate and a reservoir of management and entrepreneurial skills are some of India's strong economic fundamentals that will insulate India from the global financial meltdown, he stressed.
However, if the downturn continues for long, it will affect the flow of foreign investment into India, he said.
"This has vindicated that we should go ahead with reforms but in a gradual, calibrated manner. Over-enthusiastic liberalistion can lead to problems," he said.
Although there will be uncertainties, Ahluwalia, the government's chief pointsperson on economic issues, underlined that the world economic recovery will start around 2009.