Amid a political scramble following the Trinamool Congress (TMC)’s formal exit from the United Progressive Alliance (UPA) government and the Samajwadi Party pledging its support to avoid early elections and keep “communal forces” at bay, Prime Minister Manmohan Singh on Friday went on air in one of his longest addresses to the nation.
Seeking trust and understanding of the people, Singh explained the economics behind the government’s recent decisions of raising diesel price and capping subsidised LPG cylinders for a consumer at six in a year. Citing the rising global oil prices and the mounting subsidy burden, he said: “If we had not acted, it would have meant a higher fiscal deficit... If unchecked, this would lead to a further steep rise in prices and a loss of confidence in our economy. The prices of essential commodities would rise faster. Both domestic as well as foreign investors would be reluctant to invest in our economy. Interest rates would rise. Our companies would not be able to borrow abroad. Unemployment would increase.”
“Money does not grow on trees,” he observed, adding a similar predicament had stared India in the face in 1991 (when he was the finance minister). “Nobody was willing to lend us even small amounts of money then. We came out of that crisis by taking strong, resolute steps. You can see the positive results of those steps. We are not in that situation today, but we must act before people lose confidence in our economy,” he said. Referring to western nations, he said the world “is not kind to those who do not tackle their own problems”.
|ON REFORMS: The time has come for hard decisions... I ask each one of you to strengthen my hands|
|ON OPPOSITION: Please do not be misled by those who want to confuse you by spreading fear|
|ON THE NEED TO ACT: The world is not kind to those who do not tackle their own problems. I am determined to see that India will not be pushed into that situation|
|ON DIESEL PRICE HIKE: Much of diesel is used by big cars and SUVs owned by the rich and by factories. Should government run large fiscal deficits to subsidise them?”|
|ON CAP ON SUBSIDISED LPG: Almost half of our people, who need our help the most, use only six cylinders or less|
|ON AAM AADMI: No government likes to impose burdens on the common man... At the same time, it is our responsibility to defend the national interest|
The PM explained that the government tried to protect those who were vulnerable. “We raised the price of diesel by just Rs 5 a litre instead of the Rs 17 needed to cut all losses on diesel. Much of diesel is used by big cars and SUVs owned by the rich and by factories and businesses. Should government run large fiscal deficits to subsidise them?” he asked.
The PM said the government had tried to be protective. “We reduced taxes on petrol by Rs 5 per litre to prevent a rise in petrol prices. We did this so that the crores of middle-class people who drive scooters and motorcycles are not hit further. On LPG, we put a cap of six subsidised cylinders a year. Almost half of our people, who need our help the most, use only six cylinders or less. We have ensured they are not affected,” he said.
On foreign direct investment in retail, he said fears on this account were misplaced. It was possible for small stores and shopping malls to exist side by side. Intriguingly, the PM did not refer to the economies of scale that would benefit the consumer. Instead, he focused on the benefits to farmers, because the policy put the condition that 50 per cent of all investment would be meant for cold chains and to transport agricommodities from the farm to the market.
The ensuing Maharastra Budget may witness several tax relief for the dealers, traders and growers of agricultural and allied services.
WPI inflation ends FY14 at a 3-month high driven by higher food prices