Reiterating the government's commitment to lowering inflation, Prime Minister Manmohan Singh today said that 'appropriate policy measures' will be taken to reduce prices at a meeting of the Economic Advisory Council. Stating that the global environment is conducive to sustaining India's higher growth rate, he made it clear that "it is necessary to ease domestic constraints on growth". Wholesale prices of food items including pulses, fruits, eggs and vegetables have risen in past weeks, taking the inflation index to a near two-year high at 6.11 per cent till the week ended January 20. To curb spiralling inflation, the government has already taken fiscal measures such as import duty cuts on cement, steel and edible oils and has banned exports of skimmed milk powder. On the monetary side, the Reserve Bank of India has increased the cash reserve ratio and short term lending rate (Repo Rate) for banks to put a check on credit expansion. The Economic Advisory Council to the PM, which met here today, held that overall economic growth is expected to be close to 9 per cent this fiscal. In a report, council chairman C Rangarajan, said that per capita income growth would be more than 7 per cent in 2006-07, the highest in 15 years. He also projected a sharp increase in savings rate to 35 per cent of national income on account of improvement in both private sector and government sector savings rate.Rangarajan identified inflation as a key macro-economic challenge in the short-term. He said that steps already taken by the government and the Reserve Bank of India should be able to dampen inflationary expectations and bring respite on the price front. While global factors and rising demand had contributed to inflation in some sectors, supply constraints had contributed to a larger extent. Easing of the supply constraint through appropriate interventions in the real economy, lower tariffs, higher agricultural and industrial productivity would ease the price pressure, he said.
