The government has said inflation will return to single digits by the end of the current fiscal and asserted it was not in favour of taking excessive harsh measures to rein in the problem as it will have a harmful impact on the economy.
Talking to reporters accompanying Prime Minister Manmohan Singh on his US visit, the deputy chairperson of the Planning Commission Montek Singh Ahluwalia said the trend of constant rising inflation in India was disappearing.
Maintaining that the financial meltdown in the US has not had a direct impact on India, Ahluwalia said the country had an ample stock of foreign exchange reserves to deal with the temporary meltdown in financial markets.
"The direct impact has been negligible," he said. He also said that the financial turmoil is not likely to settle quickly and may only end by next year. "A turnaround in financial markets cannot be expected by the 2009 end," he said.
From India's point of view, however, it will be foolish to think that it will not face any economic uncertainties in the future if the turmoil in the financial markets continue, Ahluwalia said.
On the sensitive issue of land acquisition in states for setting up industries, Ahluwalia said state government must create a credible mechanism for purchase of land by industrialists. The process of compensating landowners should be done in a fair and transparent manner and there should not be any exploitation, he said.
On energy security, Ahluwalia said restrictions for India in the high technology sector will have to be lifted. The financial turmoil in the US showed that India's liberalisation strategy stood vindicated, he said, adding, that excessive financial innovations led to vulnerability of the financial markets.
Any innovation cannot go beyond regulation, Ahluwalia said.
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