Capital inflows impacting prices and exchange rate, says FM

Delivering the speech titled Road travelled and the way forward, Chidambaram said that on the demand side, higher growth in foreign reserves — which were estimated at over $239 billion at the end of last month — and robust credit growth have exerted pressure on prices. “From time to time, we are faced with a mismatch between supply and demand in the case of primary commodities, including food articles,” Chidambaram said.

The central bank has played its part in containing demand side pressure on prices and the government has responded to such developments by moving further on the path of economic openness by increasing access to the external markets.

There are indications that on the agriculture front some of the supply side constraints may be eased in the current year, Chidambaram said. On the whole, despite occasional spurt in prices, growth has come about with modest inflation, he added.

Chidambaram further said that although the country has been witnessing robust economic growth, it has to deal with numerous, almost formidable challenges. India ranks low at 126th position in the world according to the Human Development Report, 2006, he pointed out.

“Many of the Millennium Development Goals appear, at present, just beyond our reach by the year 2015,” the finance minister said.