The Prime Minister's Economic Advisory Council (PMEAC) on Wednesday projected a 7.5-8 per cent growth for the next fiscal. It also called for phasing out of subsidies, including upward adjustment of petrol and diesel prices and deregulation of urea prices.

Releasing the Review of the Economy 2011-12 here, PMEAC Chairman C. Rangarajan said the country could even achieve higher economic growth, provided the global environment was favourable. “We might be able to achieve 8 per cent growth on our esteem if the world environment is favourable, we will be able to achieve high growth rate,'' he remarked.

He said the growth rate was likely to be 7.1 per cent in 2011-12, marginally higher than the 6.9 per cent growth projected by the Central Statistical Organisation (CSO). The economy recorded a growth of 8.4 per cent in 2010-11, which, according to the CSO estimates, is expected to moderate to 6.7 per cent in the current fiscal.

Referring to inflation, which has remained at a higher level in 2011, he said it would moderate to 6.5 per cent by March-end and 5-6 per cent in the next fiscal. While the retail inflation based on the Consumer Price Index (CPI) was 7.65 per cent in January, the Wholesale Price Index (WPI) inflation was 6.55 per cent.

The PMEAC also called for upward aligning of diesel and petrol prices to the global market in a phased manner and also raising excise and service taxes to the pre-crisis level of 12 per cent. It pitched strongly for deregulation of urea prices. Dr. Rangaranjan said the high fiscal deficit, which is expected to overshoot the target of 4.6 per cent of GDP this fiscal, was a matter of concern and the government must try to contain and improve efficacy of subsidies.

“It will be necessary during 2012-13 to make some adjustments on the diesel price in a phased manner. We have not done this for quite some time and the international crude prices have gone up. It is not possible for us to subsidise this sector beyond a level,'' he added.

The diesel price was last hiked in June, 2011. However, the government had cut excise and customs duties to cushion the impact of the price rise, thus, sacrificing an annual revenue of Rs.38,000 crore.

He said the partial reforms in the fertilizer subsidy regime of introducing nutrient-based subsidisation would not be effective unless the price of urea was decontrolled or at least raised substantially. The government expects that its subsidy bill would increase by Rs.1 lakh crore to Rs.2.34 lakh crore, mainly on account of higher outlay towards fertiliser, food and oil. Dr. Rangarajan said the excise duty and the service tax should be increased to the pre-crisis level, a move that would bring in additional Rs.35,000 crore revenue. Before the economic crisis, service tax and excise duty rates were at 12 per cent, but as a stimulus the government had brought them down to 10 per cent in 2008-09.

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