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India's annual inflation rate hit 4.89 percent in mid-February, the highest in more than eight months and just below the Reserve Bank of India's target of 5 percent for the fiscal year ending March 31.
"One of the reasons why inflation is still a threat is because of food price inflation," Chidambaram told businessmen three days after he unveiled the 2008/09 budget.
"If we grow enough food to feed our people, we are insulated from world prices, but if we are dependent on imports we are subject to world prices."
He said world prices of wheat had increased by 88 percent since April 2007 and those of rice by 15 percent.
India's food output has failed to keep pace with the demands of its 1.1 billion population, most of whom rely on the land for all or part of their livelihoods.
Stagnant farm growth has widened an already yawning wealth gap between city and village.
At the same time, a jump in global prices of farm commodities has made importing staples a costly and politically damaging exercise and contributed to a spike in local food prices.
"Taking all this into account, we came to the conclusion that the distress of the farmers calls for an unorthodox response. And the response was the farm loan waiver," Chidambaram said.
The finance minister announced in Friday's budget a controversial plan to write off $15 billion of small farmers' debts to banks in a move analysts say is aimed at wooing voters ahead of elections due by May 2009.
Chidambaram added the government would step in if there were signs that growth in some sectors of the economy was flagging.
The Indian economy is the third largest in Asia and the fastest growing major one in the world after China.
Gross domestic product grew at 9.6 percent in the fiscal year 2006/07 and is on course to slow slightly to an estimated 8.7 percent in the year which ends on March 31.
"You have my word that if any sector faces difficulties, if there is any signal that growth is flagging in some sectors, government will certainly step in and try to see what can be done to that sector," Chidambaram said.
Agricultural Exports must be discouraged,Govt Only steps are sanction of Loans for expenditure on certain areas, but there is very less effective usage of the funds, allocated.
Waving off the debt is not the solution for farmers. Instead we should provide ways to make them earn more money, which will enable them to pay the debt and still have money left with them for them. This will help both banks and them, which inturn will help country.
How can we curb inflation ,which are the areas in which we have to concentrate, our inflation at any cost should in between 3.5% to 4%.to grab the gdp of 9% tp 9.5%
Understand the petrol or diesel from processing to petrol stations cost on rs 20/per litre. However the govt is selling the petrol for rs 50. The petrol/diesel is the life line of the economic and fuels inflation if the price is high. I am surprise that FM Chidambaram is so naive and ignorant to know that to control inflation the price of oil should be reduced.
Dear Sir, If inflation is still a threat to Sh Chidambaram, Finance Minister, what about the people . If the authority who controls and regulates the control handle of inflation, how can people save themselves, howsoever, Rs 60,000 crores he may wave us from paying. There is already a PDS, which is in bad shape, similarly, the FDSV (Favours Distribution system for Voters) will also run in bad shape. We will develop a habbit of ignoring the payment of debts taken from Banks, with a view that CEO of FDSV will some day or the other again turn up on 28/29 February to submit the Budget.
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