Inflation a major challenge for the government: FM

NEW DELHI: Finance Minister Pranab Mukherjee has said that the major challenge for the government as of now is to control inflation and the monetary policy pursued by the central bank may impact growth.

"Our major challenge in the short-term is inflation, which has implications of sustaining our growth momentum," he said at an Assocham meet on Friday.

Mukherjee said that the monetary policy has been gradually tightened and monetary measures may end up moderating the growth if they have to be persisted for an extended period of time.

He, however, expressed confidence that India is in a position to sustain high economic growth in the coming decades. "The growth drivers of the economy remain broadly intact," he said, adding, "We should be able to repeat the growth performance of 2010-11 in 2011-12 as well," he said.

RBI on Thursday had hiked key policy rates for the tenth time since March, 2010, in a bid to tame inflation, which crossed the 9% mark in May. In 2010-11, the country’s gross domestic production (GDP) is estimated to have grown at the rate of 8.5%. "We need to aim at a GDP growth of 9 to 9.5% for the 12th five year plan," he said.

Mukherjee said that the government is in the process of deepening policy reforms in the financial sector and addressing gaps in the overall economic regulatory architecture.

"Major steps are being taken to simplify and place the administrative procedures concerning taxation, trade and traffic and social transfers on electronic interface, free of discretion and bureaucratic delays," he said.

The Finance Minister said that consolidation of banking services, meeting capital adequacy requirements and effectively managing human resources are some of the key areas of concern for Indian banks. He also expressed concern over the issue of asset quality in banks and said that it is important for them to constantly monitor and bring down the Non Performing Assets (NPA) to the previous level.

"Indian banks need to adopt the best risk management practices to keep themselves abreast with global developments," he said, adding that newer perspectives and strategies towards financial inclusion are needed to reach the un-banked and the under-banked sections of our country.