Date:13/03/2008 URL: http://www.thehindu.com/2008/03/13/stories/2008031356281700.htm

Business

Impact of costlier crude on inflation

Special Correspondent

Current fiscal would still end with an overall economic growth of 8.5-9 p.c.

NEW DELHI: A confident Prime Minister’s Economic Advisory Council (EAC) Chairman C. Rangarajan on Wednesday sought to allay apprehensions on a slowdown saying that the current fiscal would still end with an overall economic growth of 8.5-9 per cent although the soaring global crude oil prices could put pressure on inflation.

Speaking to newspersons on the sidelines of a function here, Dr. Rangarajan also felt that the measures proposed in the budget for 2008-09 by way of duty cuts and tax exemptions would boost demand and output and arrest the slump in industrial production witnessed in January. Noting that high global crude oil prices “could put pressure on inflation”, Dr. Rangarajan said: “Slowdown in industrial production could be cyclical and budget steps could boost industrial production.” The GDP growth next fiscal, he said, would depend on “whether [the] trend in industrial production will reverse or not.” What has happened to the consumer durables sector could reverse if a cyclical upturn begins, he said.

Explaining the need for striking a balance between growth and inflation, the EAC Chairman said: “Growth is an objective and containing inflation and maintaining reasonable price stability are other objectives,” while pointing out that cuts in interest rates to boost consumer demand and industrial growth as also reining in inflation was a balancing act and “we must continue to opt for a balancing act. We have to balance between the two.”