“We have to take all the necessary steps to keep inflation at moderate levels”, he said while speaking at the 9th Pravasi Bhartiya Divas here.
Mr. Mukherjee said the stimulus provided by the government to boost the economy in the aftermath of the global financial meltdown, among other things, was also responsible for rising prices.
“In economy, every action has reaction. We have to face a situation where fiscal expansion led to rise in fiscal deficit ... that led to unstable price regime coupled with the global commodity price increase. (These) are the current challenges of the policy makers,” he added.
Led by spurt in prices of onion and other vegetables, the food inflation jumped to a year’s high level of 18.32 per cent on December 25.
The government had already taken tough action against hoarding to check rising prices, especially of onions.
To help the economy combat the impact of global financial crisis in 2008, the Reserve Bank as well as the government had provided several stimulus packages.
These measures mainly included increasing money supply, lowering tax rates and hiking public expenditure.
While asking the Indian Diaspora to invest and contribute to country’s growth and prosperity, Mr. Mukherjee said the government was making efforts to achieve double-digit growth rate.
“The reform process has continued at times gradually, with new initiatives on the anvil,” he said, adding the aim is to achieve 10 per cent growth rate.
“These policy measures are directed towards two major objectives. The first is to grow the economic pie in a sustained manner and boost GDP growth to a long-term path of over ten per cent per annum.
“The second is to take concrete steps in order to ensure equitable and inclusive distribution of the fruits from this growth process”, he added.
Mr. Mukherjee said prudent monetary and fiscal policies and a calibrated reform process helped the country limit the impact of the crisis in 2008.
The country’s economic growth rate slowed to 6.7 per cent during the fiscal 2007—08 after recording a 9 per cent growth in the previous three fiscals.
However, stimulus packages from the government helped the economy revert to strong growth path and the GDP grew by 7.4 per cent in 2009-10.
In the current fiscal the Indian economy is expected to grow at 8.5-8.75 per cent. It recorded a growth rate of 8.9 per cent in the first half (April-September) of this financial year.
Mr. Mukherjee said the Indian economy continues to remain a vibrant and attractive investment destination even at a time when developed economies are fragile and offer limited productive opportunities.
He said the government has increased the funding for university education, including for the development of centers of excellence.
“Legislative measures were taken, paving the way for operation of foreign varsities in India and establishing the required accreditation and regulatory bodies,” he said.
Mr. Mukherjee said non-resident Indians have deposited USD 3 billion in 2009-10 in schemes with attractive rates of assured interest; allowing investment in real estate among others.