In a televised address to the nation, the Prime Minister said: “The time has come for hard decisions. For this I need your trust, your understanding, and your cooperation,” he said on a day when the markets hit a 14-month high. (Read: Markets hit 14-month highs on reforms push).
“Money doesn’t grow on trees,” he said, defending the decision to increase diesel prices and cap the supply of subsidised cooking gas to households. Reforms like opening up the retail sector to foreign investment, he said, are vital for reversing the economic slowdown and creating jobs.
Targeting the opposition, which has said FDI in multi-brand retail will wipe out small store owners, he urged the country not to be misled “by those who want to confuse you by spreading fear and false information. He also referred pointedly to his track record as Finance Minister and the reforms he initiated during the global recession of 1991, and said “strong resolute steps” then had come to India’s rescue then.
The Prime Minister said that hard decisions have to be taken to protect the interests of common man and restore investors’ confidence in country’s economy.
Explaining the reasons for recent economic policy decisions taken by the government, Dr. Singh said the difficult decisions were taken to raise the revenues to finance programmes in eduction, healthcare, housing, rural employment and to generate jobs for the youth.
Saying that the world economy including China, the US and Europe are struggling to deal with an economic slowdown, the Prime Minister asserted that India has been able to limit the effect of the global crisis. He pointed out that revival in investor confidence domestically and globally is needed to check the fiscal deficit and price rise .
Justifying the rise is diesel prices and the cap on LPG Cylinders, Dr. Singh said that almost 80% of oil is imported and oil prices in the world market have increased sharply in the past four years. Explaining that these increased prices were not passed on to the people to protect them from hardship, he disclosed that as a result the subsidy on petroleum products grew enormously to 1 lakh 40 thousand crores rupees last year. He pointed out that if diesel prices were not hiked, the burden of subsidy on the government would have been over two lakh crore rupees this year, resulting in higher fiscal deficit. He said that this would have lead to a further steep rise in prices and domestic and foregin investors would have been reluctant to invest, interest rates would have risen and unemployment increased.
Making a case that much of diesel is used by big cars and SUVs owned by the rich and by factories and businesses, Dr. Singh asked as to why should government run large fiscal deficits to subsidise them. He said that the price of diesel was raised by just 5 rupees per litre instead of 17 rupees that was needed to cut losses on diesel. He said that taxes on petrol were reduced by 5 rupees per litre to prevent a rise in petrol prices as it is used by crores of middle class people who drive scooters and motorcycles.
Justying the cap of 6 subsidised cylinders per year, Dr. Singh said actually only this number of cylinders are used by the needy people. He said that the price of kerosene was not touched as it is consumed by the poor. He said that even after the price increase, the prices of diesel and LPG in India are lower than those in Bangladesh, Nepal, Sri Lanka and Pakistan. The Prime Minister said that the total subsidy in petroleum products will still be 160 thousand rupees which is more than what is spent on health and education.
On allowing foreign investment in retail trade, the Prime Minister said that the opening of organised retail to foreign investment will benefit the farmers. He said that according to the regulations those, who bring FDI have to invest 50% of their money in building new warehouses, cold storage and modern transport systems. This will help to ensure that a one-third of our fruits and vegetables, which at present are wasted because of storage and transit losses, actually, reach the consumer. He asserted that now the wastage will go down, prices paid to farmers will go up and prices paid by the consumers will go down. He further added that the growth of organised retail will also create millions of good quality new jobs.
The Prime Minister said that though the state government are free to decide whether they want to allow FDI in Retail or not, he however cautioned that one state should not stop another state from seeking a better life for its farmers, for its youth and for its consumers.
The Prime Minister said that under UPA government for two terms, country’s economy has grown at the record annual rate of 8.2 per cent. Asking the people not to get misled by those who want to confuse them by spreading fear and false information, he said that he needs their trust and understanding to take hard decisions.