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The PM set out challenges for his government as it heads towards national elections due by May 2009, saying Asia’s third-largest economy must grow at 10 per cent every year to get rid of poverty and generate employment.
Annual inflation is running at 12.4 per cent, its highest since the current index became available in 1995, and rising prices are expected to be an election issue as they erode the spending power of hundreds of millions of poor voters.
“The Reserve Bank of India is taking all steps to control the rate of money supply so that prices are controlled,” the PM said in a speech to mark the Independence Day. “But in taking these steps we need to keep in mind that we do not do anything which hurts the growth rate.”
The $1-trillion economy has grown at an average of nearly 9 per cent a year since Singh’s government took power in 2004 but in the past half year the pace has been accompanied by an acceleration in inflation stemming largely from oil, food and metals prices. “I know how much each one of you is concerned about the recent rise in prices. The inflation we have seen this year is due to external factors,” Singh said. “We are taking determined steps to bring prices under control.”
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