Finance minister Pranab Mukherjee said that despite the shortfall in agriculture production, India has adequate buffer stocks of rice and wheat and the government will import what is needed to maintain demand and supply.
Addressing the media here on Sunday evening after attending the G20 Finance Ministers' meet in Edinburgh over the weekend, Mukherjee said shortage of rainfall in the country will have some impact on GDP growth in the current financial year, now estimated at around 6.5 per cent. He, however, added the country holds eight million tonnes and seven million tonnes of wheat and rice buffer stock, respectively.
"Agriculture output has been reduced due to adverse impact of shortfall in rain or floods in some parts of the country. There might be some shortfall of agricultural production which will adversely impact the overall growth which would have given more than 6.5 per cent GDP growth. Now we are assessing that it might be around 6.5 per cent. There is inflationary pressure, but to what level it will go beyond the manageable limit is yet to be seen. Seasonal factors have contributed to high prices of some of the essential commodities. I do hope that it will be possible to have a moderate impact after a month or so, particularly those that are affected by the seasonal factors," Mukherjee said.
"Therefore, though there might be shortfall of grain production, to depress the inflationary pressure we have taken adequate care to maintain the demand and supply position by allowing commodities of shortfall to be imported. Most of these foodgrains)come under OGL (open general licence) without any duty and imports are taking place," he added.
Mukherjee reiterated the Prime Minister's assessment that if rainfall is adequate, India's GDP will have a higher projection (next year), of more than 7 per cent. "I am also optimistic to that extent," he said.
For want of clarity on details, India is yet to take a stand on the proposed tax on financial transactions (popularly known as the Tobin tax) under the G20 forum, he said. "I would, however, like to make a general observation. Taxation laws have territorial jurisdiction. Article 265 of the Indian Constitution clearly says that no tax can be levied other than under the authority of the law. The competent authority to pass law in respect of this is the Parliament of India," he said.
Mukherjee said the current levels of fiscal deficits cannot be sustained for a longer period of time. "By the medium term, India will have to reduce the fiscal and revenue deficit. By 2012, we will have to reduce the fiscal deficit from the present level to 4 per cent and revenue deficit to 1.5 per cent," he said.
On India's recent decision to import 200 tonnes of gold, Mukherjee said that in value terms this is very insignificant. While India's foreign exchange reserves currently stand at $285 billion, the import value of 200 tonnes of gold will be around $6 billion only, he said.
