Finance Minister Pranab Mukherjee today projected India's economic growth at 8% for the current fiscal, lower than the budgetary estimate of 9%, due to measures taken to rein in high inflation.
"If oil prices continue to rise, it would be difficult to achieve higher GDP. GDP may come down to 8% from (the projected) 9%," Mukherjee told reporters on the sidelines of ADB annual meeting here.
The government's (India) primary concern now is to manage inflation while sustaining high growth rate. Hardening of global commodity prices, particularly oil prices has accelerated inflation, he said adding "our projection is 7.5-8% inflation during the year".
Earlier this week, Reserve Bank of India too had lowered economic growth projection to 8% due to measures taken to tackle high inflation especially food prices.
India's economy is estimated to have clocked 8.6% growth in 2010-11.
Mukherjee said Inflation, particularly the increase in food prices, is a major concern for India as well as other developing countries. "We are trying to reduce it through supply and demand side management.
"On supply side we are trying to remove bottlenecks and on demand side RBI has adjusted interest rates to mop up excess liquidity in a manner so that it may not affect the economic activity," he said.
With adequate buffer stock and hopefully a good monsoon, "we are looking at easing of the price situation in India", he said.
Overall inflation was 8.98% in March and has been above the 8% mark since January, 2010.
Asked whether the government is planning to increase diesel prices in the near future, Mukherjee said "We will announce it as and when the decision is taken".
In its annual monetary policy, the RBI had advocated hike in prices of petroleum products.
The government has not allowed state oil firms to revise diesel prices since June last year when crude oil was ruling at $72-73 per barrel. Crude oil is today trading at around $110 a barrel in international markets.
Referring to speculations in global commodity market, Mukherjee said increase in prices is not merely a function of demand and supply, but also driven by huge financial flows into commodity market in search of higher return.
