'Fiscal deficit within target'

6% growth is good news: Chidambaram

Finance Minister P Chidambaram today painted a rosy picture of the Indian economy and said the government would go forward with "bold reforms" but ensure that it was "people-oriented".

"The process of economic reforms is irreversible. We are committed to strengthening, broadening and deepening reforms for stimulating economic growth," Chidambaram said at the Economic Editors' Conference. He played down the Left's opposition to key economic policy issues and said consensus had been reached on many of them.

Chidambaram said economic growth of over 6 per cent during the current fiscal should be considered satisfactory in the backdrop of high oil prices, a deficient monsoon and last year's growth record of 8.2 per cent.

"I wish to point out that even at a relatively lower growth rate of 6 per cent plus for the current year, India will continue to be one of the fastest growing economies of the world," he said.

Chidambaram said the Centre was "cautiously optimistic" about achieving the fiscal deficit (4.4 per cent of GDP) and revenue deficit (2.5 per cent of GDP) targets in the current fiscal due to encouraging growth in tax collections.

The government is hoping to make up for the excise shortfall through a higher direct tax, Customs and service tax mop-up.

The finance minister, however, said containing inflation had been a major policy challenge for the government as oil prices had reached unprecedented levels.

"We will moderate inflation. It has been spurred mainly due to crude oil and prices of petroleum products. Unless these prices come down, how do you expect inflation to decrease?" Chidambaram said.

Arguing against a further reduction in Customs and excise duties on crude oil and petroleum products, the minister said states should reduce sales tax, at least temporarily, on petroleum products to help check inflationary trends.

"The suggestion (to cut duties) is very attractive. But we will lose revenue. There needs to be a balance between giving up revenue and funding programmes for the people," he said.

He added that prices of most essential goods were under control and the government would continue to watch the situation and initiate steps as and when required.

"We are not in the business of controlling prices through price control. We can take fiscal measures like in the case of steel, oil and some other products. Any irrational behaviour will be monitored and we will continue to take steps," the minister said.

For the week ended October 30, the wholesale price index-based inflation was estimated at 7.01 per cent down from 7.38 per cent in the previous week.

Chidambaram said the stock markets had recovered and the government, along with the Securities and Exchange Board of India, had taken steps to strengthen the markets.

The minister said the government was at an advanced stage of consultations for setting up a regulator for commodity trading and a proposal would be placed before the Union Cabinet shortly. The Cabinet would also discuss the National Employment Guarantee Act soon.

Chidambaram said the country's external sector had grown from strength to strength as was evident from the $2 billion current account surplus during April-June this year and a 24.4 per cent export growth during the first half of the fiscal.