Finance minister said the government was encouraging imports of commodities like sugar, edible oil and pulses to arrest the rise in prices.
The economic stimulus package to protect the country from the impact of the global financial crisis would continue till the economies of Europe and the US recover, Finance Minister Pranab Mukherjee said on Sunday.
"We shall have to wait for some more time before we take any decision to reverse the stimulus package. I am watching the situation carefully. As you are aware, the first quarter growth was 6.1 per cent. If there is some improvement in second, third and fourth quarters, at the time of preparing the Budget next year, it will be possible for me to take an overall look into all aspects," he said.
Addressing a press conference in Bangaloreon Sunday, he said all finance ministers of G-20 countries agreed at a meeting in London recently not to reverse the economic stimulus package before the recovery in Europe and North America happens.
The finance ministers had met to prepare the brief for the G20 summit to be held on September 24 and 25 at Pittsburg, where Prime Minister Manmohan Singh was also going to participate, he said.
"We all agreed that we should not reverse the stimulus package till full recovery signs are visible," Mukherjee said.
On rising prices of essential commodities, he said the government was encouraging imports of commodities like sugar, edible oil and pulses to arrest the rise in prices.
"So far, as far as price controls are concerned, we had taken strict measures in the middle of last year and in July-August this year. We resorted to a tight money policy and made availability of credit difficult. But last year, the financial crisis came.
The government had to think of whether to continue the tight money policy, which will further reduce growth, or encourage growth by taking a little bit of risk of higher prices," he said.
He agreed that prices of certain essential commodities were high.
Before last week, the wholsale price inflation was negative but that was of no satisfaction to the ordinary consumer as the consumer price index had been moving up, he said.
"This dichotomy is bound to happen because what we are essentially concerned with is prices of essential commodities and food articles. In the WPI, the weight of food article is just 60, but in the consumper price index, it is more. To prevent the adverse impact of the rising prices of essential commodities, we are encouraging imports of products in which there is short supply like sugar, edible oil and pulses," he added.
Mukherjee said the Centre had requested all state governments to revamp the public distribution system so that at least persons below poverty line were protected by subsidising rice, sugar, wheat and kerosene oil.But at this point in time, a dear money policy could not be accepted because that would have an adverse impact on the economy, he said.
Earlier, speaking at the interactive session on the direct tax code organised by the Confederation of Indian Industry, he said the government was committed to tabling the Bill during the winter session of Parliament and introducing the new code with effect from April 1, 2011.
He urged trade bodies and professional organisations to submit their opinions as early as possible so that the government could incorporate the changes before presenting the Bill in Parliament.
Image: Pranab Mukherjee