| Finance minister P. Chidambaram with MoS finance S.S. Palanimanickam (second from left), CBDT chairperson M.H. Kherawala (extreme left), Parthasarathy Shome, adviser to the finance minister (second from right), and revenue secretary K.M. Chandrasekhar (extreme right) in New Delhi on Tuesday. (PTI)
New Delhi, July 4: The finance ministry is putting in place strategies to prevent inflation from baring its fangs at economic growth.
“The whole plan revolves around tweaking monetary and fiscal policies to control prices, while ensuring that industrial growth remains unaffected by rising interest rates or raw material prices,” senior finance ministry officials said.
The mandarins may sound out industry tomorrow at the long-delayed meeting on growth with the chambers. The meeting will be attended by, among others, Anil Aggarwal of Assocham, Sushma Berlia from PHDCCI and the Ficci duo of Saroj Poddar and Habil Khorakiwala.
Both interest rates and raw material prices are now moving north due to inflation pressures.
The finance ministry’s plan is to ensure that companies with triple A ratings continue to borrow at existing rates from banks.
Those with slightly lower ratings will access funds at marginally higher rates.
“The only people affected will be those with really low credit ratings. This will ensure quality lending as well as better investment,” the officials said.
To keep raw material prices under control, the finance ministry will facilitate cheap imports by selectively tinkering with duty rates.
Frequent changes in rates will be facilitated by the large number of duty notifications, which the government will make following the trade agreements with Asian countries. Tomorrow’s meeting will also give an opportunity to the chambers to seek reforms in areas such as the labour market and the coal sector as well as moves towards a single duty rate.
The officials said the government was keen to know the views of industry on policies to speed up growth. “But frankly right now the accent is on beating inflation while ensuring growth rates are not comprised,” they said.
Nations are apprehensive of steps to curb inflationary expectations, such as a tight money policy, as there is a possibility of industry growth being stifled by lack of investible funds.
“That has always been the challenge for democratic India ' keep growth rates up so that jobs increase and the benefits of economic growth spread, but at the same time don’t let the common man suffer from high prices,” the officials said.
The main source of worry for the government is the vagaries of the global market for crude. The sustained high prices have forced the government to hike prices of petrol and diesel, which is taking a toll on the inflation rate.
The inflation rate crossed the 5 per cent mark on June 10, and for the week ended June 17 it was 5.44 per cent. Compare this with the rate of 4.10 percent a year ago. The data, however, did not reflect the anti-inflationary measures of the government taken on June 22.