FM cautions India, Inc. on price myopia
He asked industry to refrain from the short-term view of pushing up prices in a booming economy.
By TNN |
NEW DELHI: Sounding a note of caution, finance minister P Chidambaram on Tuesday asked industry to refrain from the short-term view of pushing up prices in a booming economy. He said this would only harm industry’s own interests in the long run as it would harden interest rates.
“While contribution of primary articles and fuel items has shown a decline lately, certain manufacturing products were leading to its rise. Since there is demand, you can get the headroom to increase prices. I would urge you this is a short-term view. Entrenched core inflation will work to your disadvantage,” Mr Chidambaram said in his keynote address at the Ficci annual general meeting.
Asserting that even 4% inflation was not acceptable now, he said industry must look into the reasons. “Is it because demand is so high or because there are supply-side constraints and demand is outstripping supply?” he asked. He said that with the economy growing at a clipping pace, to look at rising demand as an opportunity for profit alone is a short-term view.
Observing that the year may end with a 9% growth rate, Mr Chidambaram asked industry to look at how to sustain the growth momentum. He pointed at the poor performance of certain sectors such as food products, paper, leather, chemical, basic metals and machinery, and asked industry to look for reasons contributing to negative growth in the areas. “If the sectors had performed like other sectors of economy, we would have had higher growth,” he said.
Expressing concern over time and cost overruns in projects, he said the government will put in place a mechanism within a few weeks to expedite execution of projects like Posco, airport infrastructure in Delhi and Hyderabad, and Delhi Metro.
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“Only yesterday, prime minister made a statement asking the finance ministry and the Investment Commission to see that a mechanism is put in place so that projects are implemented in time... I have taken the suggestion seriously,” he said.He said the malady is not confined to public sector alone and private sector projects are also suffering from time and cost overruns. It is this area where China scores over India, and industry has to require certain ruthlessness to execute projects.
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