Prime Minister Manmohan Singh acknowledged that one of the reasons for defeat in recently concluded Assembly elections of four States was his Government’s inability to control high inflation. However, he also blamed the rise in income and States’ inaction on this front.

Showing some optimism, Singh said that better days are ahead and growth will revive. While India Inc echoed the sentiments expressed by the Prime Minister, economists were critical.

The Prime Minister listed three challenges which his Government faced on economic front – creating jobs in the manufacturing sector, controlling the persistent inflation, and curbing corruption.

Inflation worries On inflation, he said, “The worry about inflation is legitimate but we should also recognise that incomes for most people have also increased faster than inflation.” He mentioned that real wages in rural areas and per capita consumption in both rural and urban areas had increased significantly.

The headline inflation, Wholesale Price Index or WPI registered 7.52 per cent for the month of November while retail inflation is over 10 per cent. The most worrying factor is that food inflation is almost around 20 per cent due to sudden spurt in vegetable prices.

While acknowledging that growth had slowed down, the Prime Minister maintained that it has been at a sustained level for the last 10 years despite the global financial crisis, the Euro Zone crisis, and what is happening in other emerging countries like Brazil, South Africa, and Indonesia.

“I don’t think ours is a story which can be described as non-successful,” he said.

Economists demur However, economists had a different take on growth optimism and reasons for inflation.

“The Prime Minister is making excuses. When he said we are set for better times, he does not give any time line. In fact, this is not going to happen soon.

“On inflation, this Government financed consumption rather than improving the supply,” Rajiv Kumar, Senior Fellow with Centre for Policy Research said. Reacting on the Prime Minister’s observation on inflation, industry chamber FICCI’s President Sidharth Birla said that food inflation can be tackled by addressing supply side bottlenecks including through better logistics.

“The country also requires amendment of APMC Act by all States and at least the UPA-led States can immediately address this," he said.

CII’s Chandrajit Banerjeee also said that increase in food supplies as also improved marketing and logistic support are crucial to rein in inflation especially pertaining to food prices.

On job creation, Singh said that there was not much success in generating employment in the manufacturing sector.

“This is an aspect of performance which we are working hard to correct. We need much stronger effort in support of small and medium enterprises which can be a major source of good quality employment,” he added.

FICCI’s Birla commented that at the end of the day, “we cannot have jobs without growth. The manufacturing sector is a core enabler for job creation. A healthy macro-environment is a precondition to allow expansion of businesses and encourage new entrepreneurs.”

Rana Kapoor of Assocham felt that economic slowdown, coupled with lack of determined policies, affected manufacturing.

“SMEs hold the key to job creation, which should be encouraged. Let elections, as the Prime Minister has eloquently observed, not deter the policies which can lead to higher growth, employment and reduced inflation,” he said.

>shishir.s@thehindu.co.in

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