Amid declining value of rupee and rising inflation, Finance Minister Pranab Mukherjee today said Indian economy is resilient enough to overcome challenges and the government will make efforts to moderate the rate of price rise and reduce current account deficit (CAD).
"I have full faith in the resilience of the Indian economy and am sure that we will be able to overcome the current economic challenges successfully as we have done in the past" he said.
"Our efforts are directed towards overcoming difficulties facing the economy, and aim at moderate inflation and have acceptable level of fiscal deficit and CAD," Mukherjee added.
The minister said this while addressing a meeting of the probationary officers of the Indian Economic Service (IES) at his office in the North Block.
The Indian economy, he said, too was facing "some challenges" due to the ongoing crisis in the eurozone countries and its impact on other parts of the world.
While the current account deficit (CAD), which indicates the difference between inflow and outflow of foreign exchange, is expected to rise to 4% of the GDP in 2011-12 from 3.3% a year ago, high crude oil prices is expected to put pressure on government finances.
More importantly, steep fall in rupee's value, which crossed Rs 56 to a dollar, is expected to push up the cost of imports, especially the petroleum products and imported fertiliser. Oil Marketing Companies (OMCs) have been clamouring for increase in prices of petroleum products.
The efforts of the government, Mukherjee said, would be to put the economy on high growth trajectory.
Indian economy was growing at over 9% before the global financial meltdown in 2008 pulled down the growth rate to 6.7% in 2008-09. Thereafter, the economy recorded a growth rate of 8.4% for two consecutive years before sliding again to 6.9% in the previous fiscal.
On the positive side, Mukherjee said services sector and agriculture have recorded good growth. "Farm sector growth is likely to be good due to expected good monsoon", he added.
Referring to political compulsions of the UPA government, he said, "as a ruling party we have to carry all partners with us and that's why it sometimes takes little longer. But at the end we are able to take decisions and implement it".
As regards the price situation, headline inflation, represented by the wholesale price index, rose to 7.23% in April from 6.89% in the previous month, while retail price inflation (CPI) entered double digits of 10.36% in April from 9.38% in March.