Singh Says India's Inflation Under Control, Poverty Declining

from Bloomberg Asia

By Bibhudatta Pradhan and Shailendra Bhatnagar

(Bloomberg) -- Prime Minister Manmohan Singh said his government has controlled inflation in India amid a record surge in oil prices and aims to cut poverty by sustaining the world's second-fastest pace of economic growth.

``We have managed to keep inflation under control in the face of many difficulties,'' Singh told fellow party members in New Delhi today. ``When our government came into office the price of crude oil was about $35 per barrel. It has now reached almost $100 per barrel.''

Singh's Indian National Congress party led federal ruling coalition has cut taxes while the central bank has raised interest rates and reduced the cash in the banking system to curb inflation, which rose to a two-year high in January.

India's inflation has slowed since then, holding near a five-year low as the government subsidizes fuel to protect consumers from record crude oil prices ahead of state elections. Wholesale prices rose 3.11 percent in the week ended Nov. 3 from a year earlier, compared with a 2.97 percent gain in the previous week, the Ministry of Commerce and Industry said yesterday in New Delhi.

``The government is simply hiding inflation by keeping petroleum product prices low and forcing refining companies into losses, and then funding those losses by bonds,'' said D.H. Pai Panandiker, president of the RPG Foundation, an economic policy group based in New Delhi. The government is issuing oil bonds to the state-run refiners to make up for the losses.

The prime minister said the benefits of economic growth were percolating down to the poorest in the country of 1.1 billion people.

Growth Benefit

``We are also witnessing another beneficial effect of this growth,'' Singh said. ``Poverty figures are declining in most parts of the country.''

Asia's third-largest economy after Japan and China has grown an average 8.6 percent since 2004, the fastest pace since independence in 1947. Among the major world economies, it's the second-fastest pace after China.

``I am confident that if we continue to keep the nation on this growth path, it will be possible to reduce poverty to a single-digit figure within the next decade,'' Singh said, without elaborating.

By the World Bank's measure, half the people in the world's most populous nation after China live on less than $2 a day.

Still, growth will need to be aided by economic changes to make a dent on poverty, Panandiker said.