India not sacrificing growth to cool prices - Ahluwalia

By C.J. Kuncheria

NEW DELHI (Reuters) - The government is not sacrificing growth to control inflation, as the economy needed to keep growing at 8 percent or more, Montek Singh Ahluwalia, the deputy chairman of India's Planning Commission, said on Wednesday.

Soaring inflation, which hit a 3-½ year high of 7.61 percent in late April, is proving to be a policy headache for India, forcing the government and the Reserve Bank of India to announce a slew of measures to calm prices.

"When the government tries to bring inflation down it is not sacrificing growth, it is laying the foundation for sustainable medium and long-term growth," Ahluwalia told reporters.

Finance Minister Palaniappan Chidambaram had earlier said the government was ready to sacrifice a bit of growth to control inflation.

The RBI has maintained a tight monetary policy since mid-June 2006 to tame inflation and this has slowed credit growth and crimped demand in Asia's third largest economy.

India's industrial output growth slowed to 3 percent in March from 8.6 percent in the previous month as six-year high interest rates crimped demand for consumer goods, sparking concerns about a wider slowdown in the broader economy.

"I would not judge from the 3 percent for one month that industrial production is going to be like that for the year as a whole," Ahluwalia said.

"It is important to control inflation while keeping growth at 8 percent," he said. "High inflation will kill the medium-term growth process."