Unfazed by large scale protests over diesel price hike, Prime Minister Manmohan Singh on Saturday asserted it was a step in the right direction and expressed the hope that economy would rebound in the second half of the current fiscal.
“The recent increase in diesel prices is an important step in the right direction,” he said while addressing the meeting of the Full Planning Commission which was called to approve the 12th Five Year Plan document.
The Prime Minister also made a case for comprehensive review of energy policy saying it was vital for energy security of the country.
Energy, Mr Singh said, “is a difficult area where policy needs a comprehensive review. We are energy deficient and import dependence is going up. It is vital for our energy security that we increase domestic production and also increase the energy efficiency.
“Rational energy pricing is therefore critical. Our energy prices are out of line with the world prices”, he added.
The government had recently increased the price of diesel by Rs. 5 a litre and capped the use of subsidised LPG cylinder to six in a year per family, evoking sharp protests all over the country.
On Indian economy
Referring to global economic issues, Prime Minister said, “these short term problems present a challenge, but they should not lead to undue pessimism about our medium term prospects.
“The economy has gained many strengths. Our immediate priority must be to orchestrate a rebound in the second half of the current year. We should then try to accelerate growth to reach around 9 percent by the end of the Plan period,” he added.
The 12th Plan (2012—17) is proposing an annual average growth rate of 8.2 per cent, which is lower than the earlier estimate of the 9 per cent. The economy recorded a growth rate of 7.9 per cent in the 11th Plan.
According to the Prime Minister, the 11th Plan growth rate was commendable, “for a period which saw two global crises — one in 2008 and another in 2011”.
Mr Singh further said that poverty declined twice as fast between financial years 2004-05 and 2009-10 than it did in the previous ten years, while the agriculture grew at 3.3 per cent per year in the 11th Plan, much faster than the 2.4 per cent observed in the 10th Plan.
As regards the growth prospects in the 12th Plan, Mr Singh said, “we must also recognize that the 12th Plan is starting in a year when the world economy is experiencing difficulties and our economy has also slowed down”.
Referring to scaling down of the target in the 12th Plan from the original estimate of 9 per cent to 8.2 per cent, he said, “some downward revision is realistic given the state of the world”.
Cautioning that growth could slip if adequate actions were not taken, Prime Minister said, “I believe we can make Scenario I (which envisages growth rate of 8.2 per cent) possible. It will take courage and some risks but it should be our endeavour to ensure that it materialises. The country deserves no less.”
Reviving investments
Referring to the infrastructure sector, Mr Singh said efforts would be made to speed up implementation of the projects.
“This is critical for removing supply bottlenecks which constrain growth in other sectors. It will also boost investor sentiment to raise the overall rate of investment,” he said while calling on the infrastructure ministries to set ambitious goals for their sectors over the 12th Plan.
The country needs close to $1 trillion of investment in infrastructure (in the 12th Plan period), he said, adding, “We have to work hard to achieve this”.
The Prime Minister said he would himself review the performance of the infrastructure ministries to ensure speedy implementation of the targets.
He also emphasized the need for reviving investment in the economy to push growth. “The second component relates to macro-economic balance. To achieve the target of 8.2 per cent growth we need to revive investment in the economy. The investment environment is therefore critical,” he added.
At the same time, he said, efforts were needed to encourage Foreign Direct Investment (FDI) and Foreign Institutional Investment (FII) to deal with the problem of current account deficit.
“Because export prospects are weak, the Plan projects a current account deficit of 2.9 per cent of GDP. This must be financed mainly through FDI and FII flows...I believe we can attract the financing we need provided our fiscal deficit is seen to be coming under control and the growth momentum is regained,” he said.
On fiscal deficit, he said, “(it) is too high and is attracting adverse comment from analysts. It must be brought down over the medium term to release domestic resources for productive deployment in the economy”.
Talking about the social sector targets in the 12th Plan, Mr Singh said, ambitious programmes were being put in place in areas like health, education, water resource management, MGNREGA, PMGSY, and the National Rural Livelihoods Mission.
Keywords: 12th Five Year Plan, Manmohan Singh, diesel pricing, Indian economy, FDI in retail, multi-brand retail, UPA government, Commerce Ministry
India is generally an energy importing country. As such it is important that you exercise adequate control on your energy needs and import pressures. If not you are storing trouble for a future date. If you compare with other countries India does provide a lot of subsidies for its population both for fuel and electricity. The problem is when the public starts to expect these subsidies as a right completely oblivious to the changes in the international market changes where wholesale prices have significantly gone up.
A differential pricing for fuel is very much imminent. Government should make an intense study on this area, like we have excellent public distribution system in certain states in our country. A quota shall be fixed judiciously first. Let the rich or people who can afford may pay high price for their luxurious consumption.
This is the best step the PM could have taken, congrats on your bold
move to save the economy.
The conclusion is almost foregone the there would be a strong anti incumbency wave
in the next election. The opposition parties that are currently up in arms against the
current price hike nevertheless won't roll back the prices once they are in the driving
seat. That is guaranteed. While this administration is a bit of a lame duck, it is at least
being bold with a number of measures, perhaps because of it . The opposition are only
too happy to rend their tunics in righteous indignation. They know that it's the right,
but unpopular decision, and are only too happy to get the current administration to
make the tough choices.
Dr. Manmohnan Singh is one of the most prominent economists our country ever had. Just because he's constantly blamed of being Sonia's poodle doesn't make him any less intellect. He was already serving the post of RBI governor in 1985. We should respect his decision on FDI and stop being a prick.
There are certain sectors where we should be earning more and that is
tourism where a concerted effort is required.If a cruise ship were to
touch western ports every other day there should be terminals similar
to airports and connectivity to Bangalore and Chennai on high speed
railway. If a vessel stays in port for three days there should be
availabilty of quick transport to Madurai and Tanjore and Back.
Actually once it starts there is a reputation of clean efficient
transport and that doesn't exist in India and that is why the tourist
arrivals are not there and the PM doesnt convince and we get hardly
10% and that is where we lose.
If this increase can result in reduced cost of living in the longer term, more people out of poverty, more jobs, better standard of living, more people upgrading to middle/upper class and protection of natural resources, we welcome this bitter pill. Time will tell, if this move can bring prosperity.
India is almost on the brink of another collapse like the 1990 ,the growth has slowed down to 5%, what many Indians dont understand that if further reforms don't happen like the FDI India will go back to the financial status as it was in 1990s ,the problem is hypocrisy is inbuilt in Indian psych, we want all the wealth and comforts of the west but without investment things cant move further ,no country in the present day is independent ,if India doesn't open up further in the coming years ,it will collapse into anarchy and chaos further ,thats the status already ,whether its Congress ,BJP or any other government India has to open up to sell its services and goods to others and vice versa its cannot be one sided growth .
Although it is right step but not the necessary one. This will lead to more in increase in the already monstrous inflation. There was a other way available to decrease the loss due to diesel subsidy that too a viable one, proposed by one of the cabinet minister himself(I don't remember which one). According to him rich used the subsidized diesel to run their expensive SUVs, generators, etc, for that he proposed a diesel cess on the diesel cars. This price extra tax on the diesel cars would have balanced the sales of petrol and diesel cars as well as capped the alleged subsidy loss to a great extent. In this way the rich would have to pay for their lavish living where as condition of the poor would not ruin further.
Please auction Valuable Coal Block and 2G Spectrum. Even after Supreme Court direction to auction 2G Spectrum the Government is still reluctant. The Revenue generated from these resources will cover all the deficit. Mind the Voter is smarter now a days due to Internet Revolution. So act according the smartness of the Poor Voter. Other wise there Groups like Arvind Kejriwal will grab your seats in the Next Elections.
We are facing 2.9% deficit of GDP and to reduce it we are inviting Walmart or other retails irrespective of common men worries.
This ia right decision but practiced in wrong way. They should have raised price according changes in international market i.e. a gradual change but supressing it with subsidies and increasing steeply will definetly opposed by common man. At the same time it can lead to a whoomping rise in inflation too.
its the right direction because long we have taken the burden of subsidy we cannot continue this for long because it has fired back on us in the way of continuous inflation, increasing revenue deficit, lowering of credit rating and slowing down of economy
this shows that populist measures are not good in the long run, government should not have controlled the diesel price for this long, and this is the right way.
Pls note that this is step in the right direction only for the RICH. Sir, poor and common man's stomach is burning and they will teach a lesson.
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