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India: Inflation to Ease by 6 Percent - PM
Source: siliconindia.com
Source Date: Sunday, July 25, 2010
Country: India
Created: Aug 01, 2010

Hoping for a good rainfall in the current monsoon season, Prime Minister Manmohan Singh Saturday said it will help ease the inflation rate to 6 percent in the second half of the year but conceded the growth target for the 11th five-year plan will remain unmet.

At the same time he expressed satisfaction over the fact that even those states that had tended to lag behind in the development process in the past had shown acceleration in growth during the first half of the present plan that concludes in 2011-12.

Addressing the opening session of the 55th meeting of the National Development Council, the country's top policy forum, the prime minister also sought to drive home the point that despite falling short of target, India's growth in recent years was unprecedented.

Yet on prices, his prediction of a 6 percent inflation by the year end, as against 7-8 percent predicted by his own high-powered Economic Advisory Council, was based more on the prospect of good monsoon showers than any policy intervention.

"We expect to see the inflation rate in wholesale prices come down to around 6 percent by December," the prime minister told the council, which comprises chief ministers of all states, key members of the federal cabinet and Planning Commission members.

"The present high rate of inflation is mainly due to food price inflation. With a normal monsoon, which is the expectation at present, the rate of inflation in food prices will abate in the second half of the year," he added.

The meeting, called for a mid-term review of the 11th Five Year Plan, mainly deliberated on five areas of concern: Farm productivity, management of water resources, electricity generation targets, issues of urbanization and specific problems of tribal development.

Taking stock of the progress made during the first three years of the plan period, the prime minister said the country had fallen short on achieving various sectoral targets, especially those on infrastructure, agriculture and power generation.

"The mid-term appraisal projects the 11th plan will achieve an annual average growth rate of 8.1 percent per year. This is lower than the target of 9 percent, but is still the highest ever achieved in any plan period," he said.

Agriculture may not reach the target of 4 percent by the end of the plan period in 2012, power generation capacity would fall short of the envisaged 78,000 MW, while the upgrade of physical infrastructure has not been enough, he said.

He said agriculture, an important indicator of inclusiveness, was a matter of concern. "I would especially draw the attention of chief ministers to the Planning Commission's assessment that agriculture is not receiving the priority it deserves," he said,

"This must be corrected."

On the state of infrastructure, he said the progress was tardy and grossly inadequate if the country sought to achieve a 9-10 percent growth over sustained basis and was another area that needed more attention in the future.

"Because the resources required for bridging the infrastructure gap are huge, we adopted the strategy of encouraging public-private partnership. We need to improve the terms and conditions on which projects are awarded to ensure process is transparent, competitive."

The prime minister also dwelt on the issue of Maoist extremism and said the strategy to address this pressing problem was to address what he called "development deficit" in affected areas that makes people succumb to exploitation.

"There should be no doubt that the security challenge posed by Left-wing extremism has to be met and it will be met, with the Centre and the States cooperating fully with one another."

"But this must be supplemented by action on two other fronts," he said, listing the two fronts as overall good governance to inculcate a sense of empowerment among people and providing more development resources for the special circumstances of these areas.
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