Eco Survey: No short-cuts to check inflation

Cautioning that a quick-fire solution to shooting inflation was difficult, the Economic Survey today asked the government to calibrate policies to ensure an economic growth of 9% and arrest rising prices.

"Finding immediate answers to inflation induced by commodity-specific supply shortfall is difficult. The fight against inflation has to be calibrated without compromising growth," said the Economic Survey 2006-07 tabled in the Parliament today.

The survey, considered to be the policy pointer of the government, said that sustaining and managing the growth would remain its priority area.
"A sense of optimism characterises the current economic conjuncture. Fostering the momentum of growth continues to be a top priority," it said.

Projecting an economic growth of 9.2% in 2006-07 after logging 9% growth in the previous year, the survey remains optimistic about sustaining the growth trajectory. "With an upsurge in investment, the outlook is distinctly upbeat," it said.

Despite widespread criticism of the perceived role of the futures market in stoking inflation, the government appeared steadfast in recognising the positive contribution of the commodity exchanges. It, however, indicated that the law would be changed to improve the regulation.

Describing monetary policy as an important tool to tame inflation, the survey indicated that the days of fast credit growth seems to be over even though such trend may continue to outpace GDP numbers.

"The rapid rise in credit growth in recent years has reflected and also helped the growth momentum, but it is unlikely that this will grow as fast as in the recent past," it said.

The survey said the credit policy would have to steer a careful path of maintaining international competitiveness of the domestic economic activities underscoring the importance of keeping interest rates in check.