Politics
India can reverse the slowdown in its growth with a revival in investor confidence domestically and globally that necessitates the reforms: PM
Prime Minister, Dr. Manmohan Singh addressed the nation to explain the reasons for some important economic policy decisions the government has recently taken. Prime Minister said that the world economy is experiencing great difficulty. The United States and Europe are struggling to deal with an economic slowdown and financial crisis. Even China is slowing down.
India too has been affected, and Prime argued that India can reverse the slowdown in its growth with a revival in investor confidence domestically and globally that necessitated the reforms.
Regarding, the rise in diesel prices and the cap on LPG cylinders, Primer Minister said that India imports almost 80% of crude oil and oil prices in the world market have increased sharply in the past four years, while most of this price rise was not passed on to the people. As a result, the subsidy on petroleum products has grown enormously. It was Rs 1 lakh 40 thousand crore last year. If Government had not acted, it would have been over Rs 200000 crore this year.
As per the Prime Minister, higher subsidy burden would have pushed up fiscal deficit and further caused steep rise in prices and a loss of confidence in our economy. Both domestic as well as foreign investors would be reluctant to invest in Indian economy. Interest rates would rise. India companies would not be able to borrow abroad. Further, unemployment would increase.
On a cap of 6 subsidised cylinders per year, Prime Minister defended that almost half of people, who need help the most, actually use only 6 cylinders or less. Meanwhile, the price of kerosene which is consumed by the poor is untouched.
Prime Minister further added 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 total subsidy on petroleum products will still be Rs 160 thousand crore, which is more than what is spend on Health and Education together.
Regarding the decision to allow foreign investment in retail trade, which some think would hurt small traders, Prime Minister said organised, modern retailing is already present in India and is growing. All major Indian cities have large retail chains. Delhi has many new shopping centres. But it has also seen a three-fold increase in small shops in recent years.
As per Primer Minister the opening of organised retail to foreign investment will benefit farmers. According to the regulations, FDI investors have to invest 50% of their money in building new warehouses, cold-storages, and modern transport systems. The growth of organised retail trade will also create millions of good quality new jobs.
Primer Minister recognised that some political parties are opposed to this step so allowing the State governments to decide whether foreign investment in retail can come into their state.
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