Chidambaram urges industry to hold price line

At a post-budget interaction with industry chamber Ficci, the Finance Minister in particular appealed to sectors like pharma, two-wheelers, cars, buses, chassis and paper, which have been given deeper tax cuts in the Budget, to retain the price line or try to lower prices, if possible.

"Expand volume of production and gain in volume what you might lose by not increasing prices," he said, adding that the industry would hurt itself in the long run if it exploits short term supply-demand mismatches.

Referring to oligopolistic (situation of few sellers in market) tendencies in some industries, he said fair practices body Monopolies and Restrictive Trade Practices Commission has come out with two judgements on cement firms, pointing out that these companies are acting like a cartel.

Exuding confidence that demand will definitely rise in 2008-09, the Finance Minister said, now it is for the industry to take a challenge and produce goods and services to meet the rising demand.

The wholesale price-based inflation rose to 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 cost of petroleum products and some food items.

Even though, inflation is partly caused by rising food prices, contribution of manufacturing sector to it is not insignificant, Chidambaram said.

On Tuesday, the Finance Minister had said the government would endeavour to keep growth rate close to nine per cent and inflation close to four per cent.

Chidambaram said at a time when there are pressures brought on by growth, high global commodity, oil and food prices and slowing down of consumption the industry should rise to the occasion and become more competitive and efficient in retaining prices.

Confident that 2008-09 would also 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 lower batting average."

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

The Finance Minister said 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 "trifle" lower than the previous year.

There are no signs of slowing down of investment boom in the country, he said referring to the Prime Minister's Economic Advisory Council, which said the number one driver of economic growth is investment, closely followed by consumption.

While both services and industry are doing good, agriculture is lagging behind despite good outlays in the 10th five-year plan.

There are also certain areas in the industry where growth was flagging like auto, paper and pharma.

As such, the Budget has turned its attention to farm sector, some areas in the manufacturing and exports, hit by the rupee appreciation.