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Feel-good touch before flyout
PM plays soft to stocks dance

New Delhi, Sept. 17: The stock market is back to the level before the election results were announced in May, inflation has dropped, central employees have been handed a bunch of cash and there's more sugar for the festival season.

All this before the Prime Minister leaves on a foreign trip. And there is no hard decision ' the proposed increase in the foreign investment limit in telecom, insurance and civil aviation has been kept waiting.

A flurry of cabinet decisions, political and economic, came on a day the Bombay Stock Exchange sensitive index leapt to a four-month high of 5561.15, the highest closing level since May 7 when it had ended at 5669.58. The election results were announced some six days after that to the accompaniment of a market meltdown.

If this was a signal of the government finding its feet on the floor of the stock market, quick claims of success followed release of inflation data.

The rate of inflation plunged today to 7.81 per cent from last week's four-year high of 8.33 per cent, though sceptics said it would climb back up to 8 per cent.

Fears were expressed about the impact on prices of a 3 per cent increase in dearness allowance for central government employees and pensioners with effect from July 1 that will release some Rs 1,072 crore in the rest of this year.

Finance minister P. Chidambaram claimed credit for taming inflation with a series of monetary and fiscal measures that have checked the surge in prices of steel, edible oils and now sugar.

He said the food ministry had released an additional 2 lakh tonnes of sugar for the domestic market, which comes on top of the 13 lakh tonnes given earlier. The government also permitted duty-free import of sugar.

Chidambaram promised that the 'government will take measured steps on the monetary and fiscal side to moderate inflation and inflationary expectations'.

But dark clouds loomed over the horizon. Agriculture secretary Radha Singh said today farm production in the kharif season was likely to decline by about 6 million tonnes from 110 million tonnes last year. This could put further pressure on the inflation rate.

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