DG: In the budget that you recently submitted, your government states that its goal is to get to 10 percent economic growth on a sustained basis. When will India get there?

PC: That's the goal towards the end of the new plan, which started on the first of April 2007, which means 2007, 2012, by the last year, 2011/12, we should aim to achieve a 10 percent growth.

DG: The International Monetary Fund recently said that there is an increased risk that the Indian economy is now overheating. Is the Indian economy overheating?

PC: Overheating is a misunderstood and misused word. What is overheating? China's economy grows at over 10 percent, and it's grown so for the last 3, 4 years. Is China overheating? I don't know. All I can say is in some sectors, credit growth is indeed higher than what we would like it to be, especially commercial real estate, housing loans, personal consumption loans. In these sectors we would like credit growth to moderate. But certainly, if the infrastructure sector grows at a clipping pace, or if sectors like steel and mining and petroleum grow at a clipping pace, there's a much higher rate of growth of credit to these sectors, why should anyone call it overheating? These add to capacity, these add to production, these add to jobs. There's no reason to call that overheating.

I don't wish to get into an argument about use of this word or that word. We know that credit to commercial real estate has grown at a rate faster than what is a comfortable rate of growth. And we would therefore take steps to credit to this sector is moderated. But I don't think that asset prices have doubled or tripled. They have increased substantially, but I think they will moderate, once credit is moderated.

DG: As you know, one of the biggest business complaints about India is infrastructure. The roads, the water, the electrical systems are all under heavy duty strain. And yet, China is investing three times as much on infrastructure as a share of its GDP compared to India. Is India investing enough fast enough in infrastructure?

PC: Not enough. We can only invest what we can afford to invest. We also do a number of things, which China does not do. So no reason to compare India and China. We, for example, guarantee employment to the very poor. We take care of a number of social sectors in a manner that is not addressed by some countries. We are a democracy. We have to respond to the felt necessities and requirements of the people. I conceed that we are not investing as much in infrastructure as we would like to, or we should, but that is a constraint which any democratic government faces: how to allocate finite resources.

DG: How fast could infrastructure spending grow?

PC: Well, we have estimated we need about $320 billion over the next 5 years. $200 billion of that will come from domestic resources, savings, tax revenues, public sector and private sector investments. About $120 billion would have to come from abroad through foreign investment.

DG: Your budget laid out a policy goal of faster, more inclusive growth. I have to tell you that the poor people that we spoke to say they're not sharing in that growth, and the prices that they're paying for the food that they eat, for limes, for lemons, for apples, for grains, are all rising faster than their incomes. What is your government doing to address their concerns?

PC: These are supply side constraints. Part of it is fallout of high growth. People are consuming more. Per capita income is rising at about 6 percent a year for the last four years. People consume more rice, more wheat, they've switched from coarse grains to these two cereals. People consume more fruits, more vegetables, more eggs, more milk. Supply should catch up with demand. Supply is not growing as fast as demand; there is a supply/demand mismatch, which is what triggered inflation in the last quarter the previous calendar year. As the supplies improve, these constraints will slowly diminish, and prices will come down. There is no magic formula to increase supplies overnight.

But it's quite obvious for anyone who travels extensively in rural India that in many -- mark my word, not all -- in many parts of rural India, life today is better and a little more liveable than it was 10 years ago, or 20 years ago, or 30 years ago.

DG: Are you concerned there may be a backlash against fast growth here in India?

PC: If there is inflation, yes. But if inflation is contained, I don't think there will be a backlash. In fact, surveys show that people welcome high growth. People recognize and realize the advantages of high growth. What is tempering the enthusiasm for high growth is the fact that inflation has ruled at about 6 percent for the last 12-15 weeks. But that is not an unusual phenomenon; we have had such inflation in the past also. The point is today inflation of about 6 percent is accompanied by high growth; in the past inflation of 7 or 8 percent was accompanied by low growth. The goal therefore is to maintain high growth even while moderating inflation. The tolerance level for inflation has come down in India. That's a good sign. There was a time when people were tolerating -- I mean, grumbling and tolerating -- 8-10 percent inflation. Today the tolerance level has come down to about 5 percent, maybe less than 5 percent, which puts governments on notice that people are not willing to tolerate inflation of anything more than 4, 4.5 percent. Makes the government's task more difficult. What we are trying to do is moderate inflation without affecting growth. Supply side issues have to be addressed in the medium to long term. Monetary measures can be taken in the short term. But monetary measures take time to pass through the system, number one. Number two, monetary measures have no impact upon shortage of food supplies.

DG: I just want to close by asking you this: If we come back to India five years from now, how will the economy be different?

PC: Oh India will be a stronger economy. Our reserves will have grown. Our growth rate will be hopefully maintained at close to 9 percent. More people will have been lifted about the poverty line. The school system will be infinitely better... More physically challenged people would have found jobs. India will be a much stronger economy. There's no question today we are much stronger than what we were 15 years ago. I mean, who can deny that?

DG: Minister Chidambaram, thank you for speaking with Nightly Business Report.