New Delhi: The Planning Commission on Tuesday admitted that there were signs of overheating in the economy, but said it was unlikely to continue in the long-term.
"There are signs of overheating in the economy and the nine per cent economic growth is putting pressure on inflation," Commission Deputy Chairman Montek Singh Ahluwalia said after a meeting between a Group of Ministers and Left party leaders on FDI limit in the insurance sector.
"The overheating," he said, "is a reflection of the fact that demand is pushing ahead of capacity in certain sectors. This, in turn, is leading to rise in prices."
Ahluwalia, however, claimed that the inflation has been brought under control. "The government has taken several fiscal and monetary measures to contain inflation," he said. Ahluwalia also said that the current upswing in the growth rate is unlikely to sustain for all times to come.
When asked whether the Planning Commission would review the growth target of 9 per cent, given in the approach paper for the 11th Five Year plan, he said measures to curb surging inflation may put pressure on high growth initially, but on an average the targets would be maintained.
There are upswings and downswings in growth, but in the five-year period till 2012, it was still projected to be 9 per cent, he said. The approach paper, which was approved by the National Development Council in December last year, has set a target of nine per cent average growth rate in the 11th Plan (2007-12) with the terminal year targeted to witness 10 per cent growth.
The Planning Commission had assumed that the economy will initially start with an eight per cent growth rate, though it has already posted a growth rate of 9 per cent in 2005-06 and is projected to achieve 9 per cent growth rate in 2006-07 as well.
The final document for the 11th Plan will be out by September, Ahluwalia said, adding that the sub-committee of NDC, including all state Ministers of Agriculture will meet on April 23 to discuss the Swaminathan Committee report on farm sector.
Ahluwalia maintained that the Planning Commission was of the view that inflation was a matter of concern and GDP growth had to be achieved with reasonable level of inflation.
"Next important target is to put agriculture on high growth path," he said.
Prime Minister Manmohan Singh had on Monday met all the members of the Planning Commission to review economic performance particularly in power, agriculture and education.
(With agency reports)
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