My aim in the budget was long-term solution to inflation: Pranab Mukherjee-2 Mar, 2011

2 Mar, 2011, 02.42PM IST,ET Now

My aim in the budget was long-term solution to inflation: Pranab Mukherjee

In an ET Now exclusive, Swaminathan S. A Aiyar talks to Finance Minister Pranab Mukherjee on a post-budget view of what Budget 2011 delivered for the 'aami admi' and what it failed to. Mukherjee analyses the macro factors looming large on the Indian economy right now, including worrisome inflation, narrowing FDI flows, food subsidies & fuel prices.

You have just presented the budget. From the point of view of the financial expert, their worry about fiscal consolidation, GST but the order remain will, his first thing was what is Mr. Mukherjee going to do for me on the front of inflation. It is not very clear that you have done very much. There is of course an increase in the income tax exemption limit but there were some people who thought there might be some other measures and in particular, there was a hope that FDI in retail to have a nice smooth seamless flow from the farmer straight to the retail would be one way of bringing down prices. It seems that perhaps that there is not enough of anti- inflation package and you have missed a very good chance to push through this measure of FDI in retail.

Pranab Mukherjee: So far FDI is concerned including FDI in retail, detailed discussions are taking place in different quarters of the government and informed discussions are going on. It will get reflected not merely in retail but how the FDI could, there be a steady flow of FDI where there is predictability and volatility would be much less, we are interested in that for many other economic reasons, that you are fully aware.

But inflation, I have emphasised in my budget and one of the major reasons why I have taken so many new initiatives and strengthened the old initiatives which I put last year on agriculture to remove one of the major reasons which led to the inflation that is the supply bottleneck from the farmers to the retailers. FDI in retail would adjust this problem in one way but at the same time, we shall have to produce for instance those commodities which are in short supply like pulses, edible oil. Even for the cereals unless I have the success in revolution in that start point, population is growing and nobody can feed India with 1 billion plus population.

Therefore all these areas are to be addressed and that is why I devoted a major part of it and series of initiatives I have taken keeping in view of the long term solution to these problems to improve the production, to remove the structural imbalance in the supply side. Similarly my effort to control the fiscal deficit and not to rollback the excise duty which I cut after 2008 which is one of the reasons that there should be surplus available to them. All these exercises had been made to have an impact on the inflation. Series of measures have been taken since the administrative measures including, one chief ministers' sub committee which is looking into the revamping of the public distribution system.