Washington: Union Finance Minister P Chidambaram on Saturday said the present challenge for his country is to arrest inflation without hampering economic growth and to maintain financial stability.
"Our current challenges are to rein in inflation without hurting the growth momentum, preserve financial stability and move more vigorously on fiscal consolidation," said a statement by Chidambaram to International Monetary and Financial Committee (IMFC) in Washington.
Chidambaram is not attending this year's annual meeting of the International Monetary Fund and the World Bank Group to make himself available for tackling any situation arising out of the spreading global financial crisis and its ripple effect on India.
"With a real GDP growth at 9.0 per cent during 2007-08, the Indian economy continued to perform well. This was, in fact, the third year in succession when the Indian economy achieved a growth rate of nine per cent and above," said the said statement presented by Reserve Bank of India Governor Duvvuri Subbarao.
Noting that the rate of price rise has gone up, it pointed out a slew of factors which have contributed to the rise in inflation.
"Headline inflation has increased significantly since early 2008, partly reflecting supply-side pressures on key agricultural commodities, increase in iron and steel prices in line with international prices, and pass-through (though partial) of international crude oil prices to domestic prices as well as continued high domestic demand," the statement said.
"India's balance of payments remained comfortable with the current account deficit at 1.5 per cent of GDP in 2007-08. Large net capital flows, which were significantly higher than the current account deficit, led to an accretion of foreign exchange reserves, placing continued pressure on monetary management," Chidambaram said.
After hovering around above 12 per cent for nearly three months, inflation declined marginally to 11.80 per cent for last week of September.
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