By IANS,
Chennai : The government must tackle the subsidy bill to restore fiscal discipline which would result in growth-friendly interest rate space in the economy, Reserve Bank of India (RBI) Subir Gokarn said Wednesday.
“Subsidy bill is by far the largest single burden on the government finances,” Gokarn said addressing the South India Chamber of Commerce and Industry’s 102nd Annual General Meeting here.
He said tackling subsidy bill should be the central part of strategy to reduce fiscal deficit.
The central bank has said its monetary policy actions would be contingent upon the government steps to cut the fiscal deficit.
A government panel headed by former finance secretary Vijay Kelkar Friday the government should withdraw fuel, food and fertilizer subsidies to curb a budget deficit that could hit 6.1 percent of gross domestic product this fiscal year.
Stating that growth and inflation are linked and controlling the latter would affect the former, Gokarn said only through sustained growth inflation could be tamed.
He said global and domestic developments influence the growth and inflation and RBI would revise its projections on inflation in its Oct 30 policy review.
Coming in support foreign direct investment (FDI) in multi brand retail as it would increase farm productivity, Gokarn said the food inflation is high due to hike in consumption.
He said the only solution for high food prices is to increase its production.