Inflation a concern but fundamentals are strong: Pranab

Finance Minister Pranab Mukherjee said on Wednesday fundamentals of the Indian economy are strong despite concerns of inflation and growth, and the overall environment will improve significantly if Parliament functions and approves important legislations.

"The economy is at a difficult situation but . . . the basic fundamentals of the Indian economy are still strong," he said while replying to the discussion on the second batch of Supplementary Demands for Grants (General) 2011-12.

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Parliament, which witnessed turmoil for the past several days over FDI in multi-brand retail, functioned smoothly on Thursday and Lok Sabha approved Supplementary Demands with a voice vote that seek to raise government expenditure by an additional Rs 56,800 crore (Rs 568 billion) during 2011-12.

According to Mukherjee, "things can improve if the institutions are strengthened, if Parliament functions, if the house debates, discusses and decides (bills). . .you will see the atmosphere is changed . . . atmosphere electrified".

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Referring to strong fundamentals, Mukherjee said the savings rate and the investment rate have continued to remain strong at around 33-35 per cent despite slowdown, though there are concerns regarding inflation and fiscal deficit.

India has been recording good growth compared to many other countries, though it has come down from the high level of 9 per cent.

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"Except for one country in the second quarter of the current fiscal, that is Turkey, no other country of comparable size.. have higher growth," Mukherjee added.

India has recorded a growth rate of 6.9 per cent in the second quarter. It may slip to 7.5 per cent in the current fiscal from 8.5 per cent in 2010-11.

As regards price rise, he said that food inflation has come down from 22 per cent in February 2010 to 8 per cent in November 2011 but there is a need to bring it down to 5-6 per cent.