Prime Minister Manmohan Singh on Wednesday said the Indian economy would grow at a robust 8.5% in 2010-11 but high prices of food and other commodities remain a key concern.
“I wish to tell you that our economy is in good shape. We will have a growth rate of 8.5% this fiscal year,” Singh said in an interaction with TV editors.
Less than two weeks for Budget 2011-12, the UPA government is grappling for options to ensure growth while keeping prices in check.
Food inflation has remained stubbornly high — it was 15.65% in January — pushed by a supply crunch in staple vegetables.
“It is true that in recent months inflation and food inflation in particular has been a problem. We want to deal it in a manner that the growth rhythm is not disturbed,” Singh said.
Weather problems in Australia, Argentina and Russia have hit global food and commodity prices, while oil prices have crossed the worrisome $100 a barrel. These have knocked up prices of other goods pushing the overall inflation to 8.23% last month.
“We are now increasingly an open economy... we have to deal with inflation despite an adverse international environment,” Singh said.
Singh said the overall inflation rate would come down to 7% by next month.
The government’s inflation control measures, Singh said, are being calibrated in a manner that they do not upset growth. “If we were concerned with only curbing inflation I think we could have done it by pursuing tighter monetary policies, we could have brought about a situation where price rise could be moderated.”
The RBI has raised key interest rates seven times so far this fiscal year to cool prices. Costlier loans mean costlier credit for consumers and higher expenses for manufacturers. Both could hit demand and growth. “If in the process, growth gets hurt I think that would not do our country any good...” he said.