Chennai: Union Finance Minister P Chidambaram today (Dec 18, 2004) said that the fundamentals of Indian economy was strong but expressed concern over the inflation rate.

The growth rate for the first quarter of the current fiscal was 7.4 per cent, which was more than that of last two years, he said while addressing a press conference.

The core industrial and infrastructure sector registered 5.9 per cent during the first seven months of the fiscal against 5.6 per cent of the last year for the same period.

The Rupee had firmed up against the Dollar and the foreign exchange reserve had touched a record of $ 130 billion, he said adding that the sensex at BSE (Bombay Stock Exchange) had crossed 6400 points.

These parameters had clearly proved that the country's economy was on a firm ground, he said.

The banks were expected to exceed their target of Rs 1,05,000 crore farm loan this year and the advances to industrial and service sector had already touched Rs 1,12,000 crore which was Rs 50,000 crore more than that of last year, he said.

However, the rise in the inflation rate had caused some concern. The rise was due to increased international price of crude oil, he said.

He said that the inflation, which stood at 5.56 per cent in December 2003 had gone upto 7.02 per cent now. Comparing a 40 per cent hike in the crude prices, a hike of 1.5 per cent in inflation rate was not much. However, the Government would take measures for 'step-by-step' reduction in the inflation rate, he said.

Asked when the decrease in the international crude prices could be seen reflected on the prices of petroleum products in the country, Chidambaram said that the price rise of petroleum products in the country depended on the price of crude in 'India basket'.

"We go by the price of crude in the Indian basket while fixing the price of petroleum products in the country," he said.

Moreover, the decrease was also 'illusionary', he said adding that the crude price which was $ 42 per barrel a day before had again gone up to $ 43.5 yesterday (Dec 17, 2004), he said.

The Centre had reduced customs and excise duty on crude to the tune of Rs 4,400 crore this year. Now it was the State Governments to reduce the Sales Tax on petroleum products.

Denying that NABARD (National Bank for Agriculture and Rural Development) had withdrawn refinancing facility to co-operative banks in Tamil Nadu, he said Centre had rather relaxed rules to enable four district co-operative banks in the State to get finance from NABARD.

He said that most of the district and primary agricultural co-operatives in Tamil Nadu, like in other parts of the country, were in 'shambles' and the State Government should take steps to revive them.