By IANS,
New Delhi : Asserting that the fuel price hike will not aggravate inflation, Planning Commission deputy chairman Montek Singh Ahluwalia Thursday said economic growth would remain on track.
“It is a correct decision. The fuel price hike will not aggravate inflation compared to what would have happened had the government not hiked fuel price. Inflation will not cross double digit, and will rather be lower four months down the road,” said Ahluwalia.
His assessment came a day after the government hiked the price of diesel and petrol Rs.3 and Rs.5 per litre, respectively, while raising cooking gas price by Rs.50 per cylinder.
“The prices of crude oil have been doubled over the years, and India imports 75 percent oil from the world market,” Ahluwalia told reporters on the sidelines of a function here.
Ahluwalia, a close confidant of Prime Minister Manmohan Singh, also said the economy would continue to grow at eight percent annually.
“Let me tell you that we are not living in a vacuum. India is not the only country in the world that is facing a sharp increase in fuel prices. I think what the government did is absolutely correct, and balanced.”
Ahluwalia said the fuel price hike in India was one of the least in the world, and pointed out that the price of kerosene had not been raised, mainly because the poor used it.
“Increase in diesel (price) is very modest, and we should be informing the people that price rises have been larger in Sri Lanka, Indonesia, Pakistan, Bangladesh, Thailand, Malaysia and Taiwan.”
The Plan panel functional head said there was no alternative before the government in view of the skyrocketing international crude prices.
“We don’t want to have a situation where by not increasing fuel price, the oil companies go bankrupt, and you have shortages. Nor is it viable to keep oil subsidised through budget, which will lead only to general inflation,” he said.
Would inflation touch the double-digit mark?
“I certainly hope inflation does not cross double digits,” Ahluwalia said. “The fuel hike can have a half percent direct effect on inflation, but eight percent growth is on target. It is a fantastic growth rate.”
“The government has taken a number of measures to bring inflation under control. We have to be patient. The fuel price hike is a sensible policy and four months later inflation will be lower. That could not have been possible if we did not take the step,” Ahluwalia said.
And what about fiscal deficit?
“It is likely to be a little more than what has been set out in the budget,” Ahluwalia conceded. “We have not made any assessment so far. The finance ministry is looking at it.”
He said the end result depends not just on oil bonds, but also on what is happening elsewhere.
“If growth is very good, revenue is buoyant, then there will not be much effect. If growth slows down, we can have different effect. The problem is being created because the world oil prices have doubled.”