India’s Prime Minister Manmohan Singh pledged to almost halve the inflation rate by December and said the country can’t realize its “full development potential” unless tensions with neighboring Pakistan are diffused.
“I am confident that we will slow inflation to 5 percent to 6 percent by December,” Singh, 77, said in a press conference in New Delhi today on completion of a year in office in his second term. “India cannot realize its full development potential unless we have the best possible relations with our neighbors and Pakistan happens to be our largest.”
Singh, an Oxford-educated economist, steered India’s $1.2 trillion economy during the global recession, helping it grow at the fastest pace after China among major economies. To improve the business climate, he last month agreed to restart peace talks with Pakistan’s Prime Minister Yousuf Raza Gilani, stalled by terrorist attacks in Mumbai in 2008.
The nation’s growth prospects fueled an almost 20 percent increase in the benchmark Sensitive Index in the past year compared with a 13.2 percent gain in the MSCI Asia Pacific Index during the period.
The stock index rose 1.6 percent to 16,712.30 on the Bombay Stock Exchange at 12:10 p.m. local time today. The yield on the key 10-year government bond increased four basis points to 7.42 percent in Mumbai, while the rupee advanced 0.7 percent to 46.61 per dollar.
The relationship between India and Pakistan, South Asia’s biggest economies, has been bedeviled by over 60 years of mistrust and two wars over the Himalayan territory of Kashmir, which the two sides claim in full.
‘Trust Deficit’
Singh said it’s the “trust deficit” with Pakistan that he wants to repair during his current term, scheduled to end in 2014, and accelerate India’s economic growth rate to a 10 percent pace each year to cut poverty.
India’s gross domestic product has grown nearly six times since 1991, when Singh, then finance minister, introduced free- market measures that cut red tape, removed state-enforced capacity caps on steel and cement makers, and allowed overseas companies including Ford Motor Co. to set up operations locally.
Since 2004, Singh presided over an annual average economic expansion of 8.2 percent, the fastest pace in the country’s history since independence in 1947.
Even so, growth was accompanied by inflation as demand for infrastructure including roads and ports outstripped supply.
Inflation Concerns
India’s benchmark wholesale-price inflation rate climbed 9.59 percent in April.
“Prices continue to be a matter of deep concern,” Singh said. “The government attaches the highest priority to containing inflation so that there’s no distress to the common man.”
China’s $4.3 trillion economy grew 11.9 percent in the first quarter, causing consumer prices to climb at the fastest pace in 18 months and adding pressure on policy makers to raise interest rates and allow yuan gains.
Singh became prime minister in 2004 after the ruling Indian National Congress party leader Sonia Gandhi, widow of former slain Prime Minister Rajiv Gandhi, unexpectedly stepped aside following the election victory and nominated Singh.
Singh and Gandhi led the Congress party to its best election win in 18 years last May. Singh became the first premier since Indira Gandhi in 1971 to be re-elected after serving a full five-year term.
Read full story here:
