India says economy in high growth phase but inflation a worry

India says economy in high growth phase but inflation a worry

	Published : Tue, 27 Feb 2007 12:00 By : Agencies Print this Story

NEW DELHI (XFN-ASIA) - India's economy has 'taken off' but rising prices are a key worry, the government said in its annual economic survey.

'The economy appears to have decidedly taken off and moved from a phase of moderate growth to a new phase of high growth,' the finance ministry said in its report card on the economy, released ahead of the unveiling of the national budget tomorrow.

'However, there are some genuine concerns on the inflation front,' said the economic survey released by Finance Minister P. Chidambaram in parliament.

The upbeat report came a day ahead of the annual budget expected to highlight measures to contain inflation as the ruling Congress government faces a slew of state elections in which rising prices have emerged as a major issue.

The state elections are seen as a dress rehearsal for federal polls which must be held by May 2009.

'We share the concern (over inflation) and we have taken a number of steps to moderate prices and we will continue to take steps,' Chidambaram said outside parliament.

Inflation fell back to 6.63 pct last week from a two-year high of 6.73 pct earlier in the month but remains far above the central bank's tolerance level of 5.0 to 5.5 pct.

The fight against inflation has to be 'calibrated so that policies contain inflation without compromising growth,' the government report said.

'With appropriate policies, it should be possible to maintain and manage high growth without inflation,' it said.

'A sense of optimism characterizes the current economic conjuncture,' the report said.

But agricultural performance is a worry, with the sector expected to grow just 2.7 pct this year, down from 6 pct a year earlier, due partly to lack of investment and poor fertilizer use, the report said.

'With more than half of the population directly depending on this sector, low agriculture growth has serious implications for the inclusiveness of (economic) growth,' the report said.

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