The persistence of high inflation for several months, driven mostly by supply-side shortages, particularly those of agricultural commodities and imported products - both primary commodities and manufactured products - has been a drag on the otherwise steady growth of the Indian economy, prime minister Manmohan Singh said today.
Addressing the second annual conference of chief secretaries of states in the capital today, the prime minister noted that the Indian economy has been on a high growth trajectory for the past few years and it could weather the global financial crisis relatively well.
While this gave us hope that we will do much better in the coming years as well, rising inflationary pressures pose a serious threat to the economy's growth momentum, Manmohan said.
More importantly, inflation affects the poor and the vulnerable disproportionately harder. From rising prices of cereals, pulses, edible oils and sugar in the beginning, inflation are spreading to other products, including manufactured products, he noted.
The recent spurt in prices has been driven by an increase in the prices of vegetables, fruits, milk, meat, eggs and fish. This poses a different kind of problem, as these commodities are not held in public stocks. Some of the increase in the prices of relatively superior food products like milk, eggs, meat and fish can be partly attributable to rising income levels.
This itself is a corollary of faster growth and the effectiveness of our programmes of social inclusion, which have succeeded in putting relatively more income in the hands of the poorer sections of the community, he said.