GDP to grow by 8.5%, fuel price hike not to impact deficit: FM

Exuding confidence that the economy will grow by 8.5% in 2011-12, Finance Minister Pranab Mukherjee today said the recent hike in prices of petroleum products will not have much impact on the fiscal deficit.

Asked if he will consider rolling back the increase in prices of cooking gas (LPG), diesel and kerosene amidst demands from various quarters, the minister said, "No... No question of revoking (price hike)".

As regards the impact of the decision to cut duties on the fiscal deficit, he said the shortfall would be made good by buoyancy in tax collection and improved compliance.

"I do not think so because this was the conscious decision... About Rs 49,000 crore will be the shortfall in the duty. I think it would be possible for us to make it up through buoyancy and by better compliance," Mukherjee said in an interview.   

The government proposes to reduce fiscal deficit to 4.6% of the GDP in 2011-12 from 4.7% a year ago.

In view of spiralling prices of crude oil in the international market, the Indian government had increased the price of diesel by Rs 3 per litre, LPG by Rs 50 per cylinder and kerosene by Rs 2 per litre. The price hike decision was accompanied by a reduction in excise and customs duties, resulting in a per annum revenue loss of Rs 49,000 crore. 

The economy, the minister hoped, would grow by around 8.5% during the current fiscal, the same rate which was recorded during 2010-11. 

"I am still holding the projection which I had that is 8.5% plus... We shall have to wait for some time. But it would not be less than 8%plus," he said.