New Delhi, Mar 3 (UNI) Giving a categorical assurance to Indian industry that the government will step in to counter any slow down, Finance Minister P Chidambaram today said inflation was still a threat resulting from high food prices.
In a post- Budget interactive session with industry, Mr Chidambaram promised to consider policy intervention if growth slowed in any industrial sector.
The Finance Minister said an important reason why inflation is still a threat is because of food price hike.
"If we grow enough food to feed our people, we are insulated from world prices, but if we are dependent on imports we are subject to world prices." He said world prices of wheat had increased by 88 per cent since April 2007 and those of rice by 15 per cent.
The country's food output has failed to keep pace with the demands of its 1.1 billion population, thus necessitating imports.
Near stagnancy in farm output coupled with rise in world food prices has resulted in decline or a freeze in farm incomes.
"Taking all this into account, we came to the conclusion that the distress of the farmers calls for an unorthodox response. And the response was the farm loan waiver," Mr Chidambaram said.
In his Budget 2008-09, the Finance Minister announced a Rs 60,000 crore debt waiver, which is being construed as an attempt to garner votes in the impending Assembly and later General Elections, Mr Chidambaram said the government would step in if there were signs that growth in some sectors of the economy was faltering.
"You have my word that if any sector faces difficulties, if there is any signal that growth is flagging in some sectors, government will certainly step in and try to see what can be done to that sector," Mr Chidambaram said.
Mr Chidambaram said after a long gap, India has become a marginal importer of foodgrain, which was a "dangerous omen." "No country with as large a population as India can be dependent on imports (of foodgrain)," he said.
Responding to the issues raised by the corporate sector, Mr Chidambaram said: "I have not forgotten the corporate sector.
Despite the advice given by my Chief Economic Advisor and suggestion from Economic Survey, we accepted your (corporates) demand of retaining peak Customs Duty rate." Explaning the rationale for reduction in excise duty reductions and relief by way of personal income tax, Mr Chidambram said these steps would spur demand for consumer goods and ultimately benefit the industry.
UNI GS YA KP1638