Govt Firm On Imports To Hold Price-Line: Fm: Chidambaram

Finance minister P Chidambaram yesterday indicated the governments resolve to hold the price-line through timely imports, while stating that the countrys foreign currency reserves had crossed a record $21 billion.

The minister also dismissed claims that the government would be hard-pressed to realise the revenue targets and said that the latest estimates compiled by the finance ministry indicated that it was on course in 1996-97.

The highest importance will be given to price stability, the finance minister said in his 80-minute reply to the budget debate in the Rajya Sabha.

The finance minister is scheduled to reply to the debate on the budget in the Lok Sabha today.

 

The embarrassment of riches in the external sector was generating pressure on the economy as a rupee equivalent of an additional $4 billion had been pumped into the economy.

The finance ministry and the Reserve Bank have one mind on several macro-economic issues and both are committed to contain money supply growth within manageable limits, the minister added in an obvious reference to the recent sterilisation efforts carried out by the apex bank to mitigate the effects of its interventions in the foreign exchange markets.

Projecting a high growth trajectory without building up inflationary pressures, Chidambaram said that the country would attain eight per cent growth in gross domestic product within the next three years.

I am now building on an economy which has gained muscle and strength during the last five years or so, he said. The finance minister, however, conceded that industry was still facing a credit crunch and steps would have to be taken to bring down the interest rate. Even though credit is available at an interest rate of 21 to 22 per cent, there is an active demand for capital for investment in the industry, he said.

He also sought to dispel fears about a fall in revenue collections as result of reduction in the tax rates. Previous experience has shown that lower tax rates lead to higher compliance, he said.

The estimates of the Central Board of Direct Taxes and the Central Board of Excise and Customs indicate that the revenue target for 1996-97 will be realised, he added. Dismissing the conventional loss calculations as a result of reduction in customs, excise and personal income-tax rate as meaningless, Chidambaram said that it would be more important to see the outcome as a result of these reductions.