Reducing inflation rate a priority: PM

New Delhi, Feb 3 (UNI) Prime Minister Manmohan Singh today said bringing down inflation rate was his government's priority as the Economic Advisory Council (EAC) identified it as a key short-term macro-economic challenge while presenting an upbeat assessment of the state of the Indian economy.

For the first time in 15 years, the per capita income is expected to be more than seven per cent in 2006 and in 2007.

Overall economic growth would be close to nine per cent, with the savings rate rising sharply to 35 per cent of the GDP this year, the EAC said at a meeting presided over by Dr Singh.

The higher savings rate is attributed to an improvement in both private sector and government sector savings rate.

In a presentation to the PM, EAC Chairman C Rangarajan underlined the robust performance of the economy in 2006-07, and said growth was being driven by an increase both in consumption and investment.

He expressed confidence that the government would be able to adhere to its fiscal targets this year, a press release issued by the Prime Minister's Office said.

Identifying inflation as a key macro-economic challenge in the short-term, Dr Rangarajan said 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 led to inflation in some sectors, supply constraints had been the major contributor.

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.

The Prime Minister said his government was committed to reducing the rate of inflation through appropriate policy measures.

He observed that while the global environment was currently conducive to sustaining India's higher growth rate, it was necessary to ease domestic constraints on growth.

Senior economic editors and analysts participated in the meeting, also attended by Finance Minister P Chidambaram.

Participants agreed with the EAC assessment that inflation management was the key short-term priority.

They advocated further trade liberalisation and other measures to increase the 'competitive environment' in the economy.

To sustain the growth momentum, they called for acceleration of economic reforms, especially in agriculture and trade sectors.

They also stressed the need for increased investment in infrastructure, economic pricing of power, water and other scarce resources, reform of government and public sector, and improving the efficiency and quality of public service delivery, especially in education, health care and rural extension services.

The participants said growth of small and medium enterprises should be encouraged.

UNI