FM confident of keeping inflation rate at 4-5 pc

New Delhi, May 23: Arguing that some amount of inflationary bouts was integral to any developing economy, Finance Minister P Chidambaram today exuded confidence that the UPA government would be able to keep the inflation rate between four and five per cent during this fiscal.

''We will be able to contain inflation between four and five per cent during this financial year...The overall inflation situation is under control,'' Mr Chidambaram said, while replying to a short duration discussion on steep rise in the prices of essential commodities, raised by Congress member V Narayansamy in the House yesterday.

BJP leader and former Finance Minister Yashwant Sinha, while describing Mr Chidambaram's reply as ''highly unsatisfactory'', however, led his party members to stage a walkout from the House.

In his nealy half-an-hour reply, the Minister said last year the RBI had estimated the inflation rate between 5 and 5.5 per cent, but it turned out to be around four per cent.

''This year also, the inflation rate will most likely be in the range of 4 and 5 per cent,'' he said.

Pointing out that pre-monsson months were always the difficult ones, he said once the monsoon sets in, there is a price restraining effect.

''We are sensitive to the problem of the price rise and effective steps are underway to contain it...but in a developing economy registering high growth rate, some inflation is indispensible. We are managing interest rate, credit rate and inflation rate reasonably well.'' In support of his arguments, he said low inflation years were also the years of low growth rate.

He further stated that if prices of commodities like wheat, rice and flour had shown an upward trend, the prices of groundnut oil, mustard oil, loose tea and salt had dipped during the last two years.

''Even within a commodity, prices have varied from city to city and from state to state because of factors like demand and supply and purchasing power of traders and consumers,'' he pointed out.

Referring to the rising prices of pulses, in particular, Mr Chidambaram said certain varieties of pulses were grown only in the sub-continent.

''More importantly, no technological breakthrough has been achieved in recent times for improving the productivity of the pulses or developing disease-resistant varieties.'' During the last so many years, the production of pulses had stagnated between 130-140 lakh tonnes, he said, adding that it was an area of concern as pulses were grown mainly on marginal and sub-marginal land on rainfed areas.

''There is a mismatch between demand and supply of pulses and this impacts prices,'' he argued.

The Minister also strongly defended import of wheat and pulses, saying it was important to augment the buffer stocks of the two commodities.

''We will not hesitate to import when it is absolutely necessary,'' he said.

Mr Sinha, however, said the Minister did not touch upon a large number of issues.

''Mr Chidambaram was not even in the House when the issue was taken up for discussion. It is an unsatisfactory reply, and we are staging a walkout,'' he said.

UNI