Ahead of monetary review by RBI next week, the government on Saturday expressed concern over rising food prices and advised the central bank to take "whatever" measures required to bring them down while keeping options open on the fiscal front.
"I am worried," finance minister Pranab Mukherjee said on rise in food prices at the AGM of the Calcutta Chamber of Commerce. Mr Mukherjee said, "I have suggested to the RBI to take whatever monetary measures needed to keep prices down."
He also talked about fiscal steps required to pull down prices. He also asked the state governments to strengthen the Public Distribution System to provide food to the poor. "The states cannot always pass on the blame to the Centre. It is also their duty," he said.
Food inflation shot up to 11.47 per cent towards the end of August from 10.38 per cent in previous week as rains disrupted supply of essential items. Cereals, fruits and milk turned dearer.
This has fuelled expectations of a rate hike by the RBI. In its mid-quarter policy review on September 16, the first such assessment the central bank will be making.
The spurt in industrial growth to 13.8 per cent in July from just over 5 per cent in the previous month has only added to these expectations.
Despite jump in industrial growth and 8.8 per cent growth in the first quarter of this fiscal, Mr Mukherjee said he was sticking to his earlier growth projections of 8.5-8.75 per cent.
"Although the growth in the first quarter was 8. 8 per cent, I am a bit conservative. I am sticking to my previous projection of 8.5 per cent to 8.75 per cent," he said. On reforms in the taxation system, he said that the Direct Tax Code (DTC) bill could be easily passed in Parliament.
In the case of Goods & Services Tax (GST), however, he said there was need for a political consensus. "It is not possible by the Centre alone. It has to ratified by two-thirds majority in both houses of the Parliament, which is not an easy task," he said.
"We have reached convergence of views in many areas, but more consensus is needed." In this context, he urged trade associations to work with the state government to arrive at a consensus.
Mr Mukherjee said that the whole idea behind GST was to avoid multiplicity of taxes and to make the rates of taxation at moderate levels. The Indian economy, he said, had gravitated towards the high growth path, which had been made possible due to the various stimulus packages which the government had extended.
"The stimulus packages have paid dividend. But this has come at a cost," Mr Mukherjee said. He said that there had been a deviation from the path of fiscal consolidation due to the packages as it was provided from within the budget.
"But we will tread the path of fiscal consolidation by keeping the fiscal deficit at three per cent of GDP during the middle of the 12th Plan period," he said.
Commenting on rise in food prices, he said "I am worried." Mr Mukherjee said that he had suggested to the RBI to take whatever monetary measures were needed to keep prices down as well as fiscal steps required on the government's behalf.
Mr Mukherjee also urged the state governments to strengthen the PDS system. "The states cannot always pass on the blame to the Centre. It is also their duty."