FM’s plea to industry: hold the price line

Exuding confidence that demand will definitely rise in fiscal 2008-09, the finance minister said, now it is for industry to take a challenge and produce goods and services to meet the rising demand. The wholesale price-based inflation rose to a nine-month high of 4.89 per cent for the week ended February 16 from 4.35 per cent in the previous week, due to rising the cost of petroleum products and some food items.

Even though, inflation is partly caused by rising food prices, the contribution of the manufacturing sector to it is not insignificant, Chidambaram said. On Tuesday, the finance minister had said that the government would endeavour to keep the growth rate close to 9 per cent and inflation close to 4 per cent.

Chidambaram said that at a time when there are pressures brought on by growth, high global commodity, oil and food prices and slowing down of consumption, industry should rise to the occasion and become more competitive and efficient in retaining prices. Confident that 2008-09 too would witness high growth, he said, “I have said that my batting average is 8.8 per cent in four years. I have no intention to close my innings with a lower batting average.”

He said the Budget proposals to cut excise duties, specific customs duty and Central Sales Tax would make products of India Inc more competitive, while the income tax measures and increase in government expenditure would spur demand.

The FM noted that services have grown at 10.7 per cent and industry at 9.4 per cent in the first nine months of the current fiscal, which is only a “trifle” lower than the figures for the previous year. There are no signs of a slowing down of the investment boom in the country, he said referring to the Prime Minister’s Economic Advisory Council, which has said that the number one driver of economic growth is investment, closely followed by consumption. While both services and industry are doing well, agriculture is lagging behind despite good outlays in the 10th Five-Year Plan. There are also certain areas in industry where growth is flagging like auto, paper and pharma.

As such, the Budget has turned its attention to the farm sector, and some areas in manufacturing and exports hit by the rupee appreciation. He said that exports have not been impacted in volume terms, but their realisation has taken a hit due to the rising rupee.