Montek moderates remarks on 'overheating'; inflation to ease soon

New Delhi, Mar 22 (UNI) Planning Commission Deputy Chairman Montek Singh Ahluwalia today sought to wriggle out of his controversial remarks over ''the overheating of Indian economy'', saying the Indian economy had a lot of bounce in it and the traget of nine per cent economic growth rate was ''realistic and sustainable''.

''The short-term measures being undertaken by the government and the RBI to rein in inflation would start yielding results in the coming months and the inflationary pressure would soften in next three months,'' Dr Ahluwalia told reporters on the sidelines of an international railway conference here.

When asked about his statement on the ''overheating of Indian economy'', he said, ''Don't make it a case of high growth rate versus inflation. It is not a case of overheating.'' He said the government policies had been put in a proper direction for achieving a higher growth rate. During the last four years, the average GDP growth rate had hovered around 8 per cent, and during the Eleventh Plan (2007-12), it has been targeted at nine per cent.

In this connection, he referred to the contention of some international economic experts that India could maintain the high growth trajectory for the next 20 years if critical constraints in its economy are removed.

He also suggested that nothing drastic should be done in the name of ''cooling down'' that may have repercussions on different sectors of the economy.

''You should try to bring it (inflation rate) down gradually,'' he said, adding that containing inflation was the job of macro-management. ''The job of the Planning Commission is to accelerate the pace of supply side expansion as a mid-term and long-term strategy.'' Dr Ahluwalia said there were sectors where supply side was not keeping pace with the growing demands. ''This imbalance has to be corrected by focusing attention on removal of supply side constraints,'' he reasoned out.

The Finance Ministry has been in a denial mode on the inflationary pressure, arguing that it was a seasonal phenomenon resulting from short-term demand-supply imbalances in primary goods like cereals, pulses and some commodities like steel and cement.

Earlier this week, Dr Ahluwalia and Mr C Rangarajan, former RBI Governor and Chairman of the Prime Minister's Economic Advisory Council, were quoted by the media as saying that there were ''some signs of overheating in the economy and the 9 per cent economic growth is putting pressure on inflation.'' Driven mostly by higher food prices, inflation for the week ended March 3 rose to 6.46 per cent from 6.10 percent a week earlier. In February, it hit a two-year high of 6.7 per cent. It is well above the RBI's target of 5-5.5 per cent for this fiscal, ending March 31.

UNI