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Last Updated: November 23, 2007 11:59 IST
Expressing concerns over rising prices of essential commodities globally, Finance Minister P Chidambaram on Friday favoured adjustments in domestic policies to contain inflation.
Welcoming a business delegation from Iceland, Chidambaram said: "Universally there is a concern for inflation which is mainly driven by high oil, commodity and food prices."
He said that food price hike is primarily due to increased use of corn in bio-fuel production.
Pointing to global oil prices touching new highs, the finance minister said: "It is important to factor in price increase and adjust our policies so that inflation doesn't get out of hand."
Chidambaram also said that fortunately India remains largely insulated from the global turbulence caused by US sub-prime mortgage crisis.
"We cannot afford shocks and major turbulences in our markets, so we are cautious and calibrated in opening up the capital and financial markets. But we have set the course to open up our markets," he added.
Stating that the country's highest priority is infrastructure, he said massive investments have been planned in the sector during the 11th Plan.
"Our infrastructure is good enough to support a growth rate of 5-6 per cent, but not adequate to support 8-9 per cent growth," he said, adding that the country has earmarked to invest $475 billion in infrastructure in the next five-year plan.
He said that bulk of the amount would be raised within the country, "but (there is) still a need to attract 120-130 billion dollars FDI."
The country had last year attracted more FDI than the targeted $10 billion, he said.
Chidambaram said that the country witnessed 8 per cent economic growth for the last four years. "In 2007-08, we are confident to achieve a rate that will be close to nine per cent."
He said that the country has 35 per cent savings of the total GDP and it expects to increase it to 40 per cent in the next five years.
The growth in developing Asia is particularly impressive, he said, adding that "China and India contribute 44 per cent to the global economic growth."
"China is leading the way and we are hopeful that India will retain its growth," he said.
Regarding capital inflows, Chidambaram said: "In the last few months, we had to cope with the rush of capital inflows in India."
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