Admitting that hiking the prices of petrol diesel and LPG was a "difficult" decision, Finance Minister P Chidambaram said on Friday that the government would take more "moderate" measures to contain inflation, but promised to maintain a benign interest rate regime so that growth is not stifled.
"Petro price hike (yesterday) was a very difficult decision. Global crude oil price is not a matter under our control. These are matters people have to understand," Chidambaram said at the Hindustan Times Leadership Initiative conference in New Delhi.
Chidambaram parried a question from a reporter on the Left parties' demand for a rollback of the hike in prices of petrol, diesel and LPG.
Expecting the high crude oil prices to start coming down by January, he warned that, "If oil prices do no moderate after the winter, we have to let people know that we have to live with high (oil) prices".
Attributing the over seven per cent inflation to the surging global oil prices, Chidambaram said, "As and when necessary, both fiscal and monetary measures will be taken to moderate inflation", but in a manner that they do not stifle growth.
"Unless oil prices come down, how can we expect inflation to come down below seven per cent?" he said, pointing to the rise in global crude oil price by 150-180 per cent during the year.
To a question, he said, "We need a benign interest rate regime, adequate credit and liquidity. Our approach is that we must have a carefully calibrated monetary policy that does not stifle growth, which is imperative for achieving a higher 7-8 per cent GDP growth."
Chidambaram did not expect the term lending rates to go up in the face of the hike of 0.25 per cent in repo rates to tame inflation, saying there was enough liquidity in the market.
"I don't think term lending rates will rise. There is enough liquidity and enough lendable resources. Banks are tinkering only with the rates for NRI deposits and some bankers say there could be some change in home loan rates," he said.
The finance minister said the government has not ruled out public sector divestment.
But there was a need to reconstruct the policy so that it became acceptable to the people and the UPA government's coalition partners, he said.
The reconstruction has been necessitated because of the privatisation policy pursued by the previous Natioanl Democratic Alliance government in the last 3-4 years, he said.
Once the divestment policy is reconstructed by the government, hopefully, revenue would start flowing from dvestment, Chidambaram said.
Regarding foreign direct investment, Chidambaram said the government would soon arrive at a consensus with its coalition partners on the issue.
He, however, pointed out that 98 per cent of the investment came domestically and FDI played at the margins.
"We are in no dearth of money. What we need is bankable projects. We need to clone dozens of Sridharans, Tatas and Ambanis who could implement projects in time," Chidambaram.
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