FM sees services and industry sectors growing at 10%

Unfazed by the slow down in the industrial production growth, Finance Minister P Chidambaram on Monday said that services and industry sectors...

Unfazed by the slow down in the industrial production growth, Finance Minister P Chidambaram on Monday said that services and industry sectors — which contribute 83 per cent to the economy-will record nearly 10 per cent growth for the current financial year (2007-08).

Speaking at the Economic Editor’s Conference, the finance minister said “domestic prices may be impacted by international hardening of food grain, commodity and energy prices” and added that the economy should be “insulated to the extent possible from the potentially adverse effects of the economic slowdown occurring in some of its major trading partners”.

The statement comes at a time when the economy is gearing to clock an average growth of 9 per cent over the next five years. Pointing towards the need to increase the absorptive capacity of the economy, he said, “The short-term challenges are posed by the unprecedented influx of capital inflows, increasing foreign exchange reserves and appreciating rupee”.

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According to the FM, “these inflows are a test of the absorptive capacity of the economy”.

Asked if the government planned any further steps to check the capital inflows, the FM said “One didn’t expect an instant reaction to these steps announced but I think the measures that Sebi announced will moderate inflows in the short to medium term” and added that “at the moment, no more steps are planned.”

Outlining the challenges ahead in the medium and long term, Chidambaram stressed on the importance to complete the several infrastructure requirements without incurring “cost or time overruns”.

To effectively sustain the high growth witnessed in the recent years, he said, “We require development of diverse, regionally balanced, physical and social infrastructure”.