Managing inflationary pressure biggest challenge: Rangarajan
25 Apr 2011
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Speaking at a function in Vadodara, Dr Rangarajan, chairman of the Prime Minister's Economic Advisory Council and former governor of Reserve Bank of India said managing inflationary pressures -- particularly in food grain prices -- was the biggest challenge before the policy-makers.
He was speaking on the topic `the growth path and some concerns on the way' at a function at Federation of Gujarat Industries (FGI) today.
He said there were a few areas where immediate engagement of policy-makers was needed. In the short run, managing inflationary pressures, particularly food grain prices, was the biggest challenge he said.
He said that the government also needed to watch out for what happened to crude prices in the global markets. He added the government must remain committed to maintaining a low level of inflation.
Rangarajan said he did not subscribe to the idea that high growth demanded higher level of inflation. He said the economic planners must use policy instruments at hand, interventions in the grain market, fiscal and monetary policies, to bring down inflation further and re-anchor inflationary expectations to the 5 per cent comfort zone.
He added that the second concern was the balance of payments given that the current account deficit had remained very high at 3.7 per cent of the GDP in the first half of 2010-11. He said efforts had to be made to bring down the current account deficit to a more manageable level of 2.0 to 2.5 per cent of GDP.
He said this was desirable to impart the much-needed stability on the external payment front as also to reduce the risk to domestic economy from volatility in international financial markets.
He pointed out that fiscal consolidation which was a necessary pre-requisite for sustained growth was another critical challenge that needed to be faced.
He said that in 2010-11, the fiscal deficit was expected to come down to 5.1 per cent and it was projected to fall to 4.6 per cent in the current fiscal.
Rangarajan added that over the medium term, farm economy and power generation would be crucial sectors.
He said that steps must be taken to revitalise the traditional crop agriculture which was vital to food security and farm income.
He added that agricultural production needed to respond to consumer demand shifts.
He said that shortage of physical infrastructure, most importantly electricity, was another big challenge. He stated that a more "aggressive path" of capacity creation must start immediately for sustaining a high growth rate of 9 per cent.
He was speaking on the topic `the growth path and some concerns on the way' at a function at Federation of Gujarat Industries (FGI) today.
He said there were a few areas where immediate engagement of policy-makers was needed. In the short run, managing inflationary pressures, particularly food grain prices, was the biggest challenge he said.
He said that the government also needed to watch out for what happened to crude prices in the global markets. He added the government must remain committed to maintaining a low level of inflation.
Rangarajan said he did not subscribe to the idea that high growth demanded higher level of inflation. He said the economic planners must use policy instruments at hand, interventions in the grain market, fiscal and monetary policies, to bring down inflation further and re-anchor inflationary expectations to the 5 per cent comfort zone.
He added that the second concern was the balance of payments given that the current account deficit had remained very high at 3.7 per cent of the GDP in the first half of 2010-11. He said efforts had to be made to bring down the current account deficit to a more manageable level of 2.0 to 2.5 per cent of GDP.
He said this was desirable to impart the much-needed stability on the external payment front as also to reduce the risk to domestic economy from volatility in international financial markets.
He pointed out that fiscal consolidation which was a necessary pre-requisite for sustained growth was another critical challenge that needed to be faced.
He said that in 2010-11, the fiscal deficit was expected to come down to 5.1 per cent and it was projected to fall to 4.6 per cent in the current fiscal.
Rangarajan added that over the medium term, farm economy and power generation would be crucial sectors.
He said that steps must be taken to revitalise the traditional crop agriculture which was vital to food security and farm income.
He added that agricultural production needed to respond to consumer demand shifts.
He said that shortage of physical infrastructure, most importantly electricity, was another big challenge. He stated that a more "aggressive path" of capacity creation must start immediately for sustaining a high growth rate of 9 per cent.
