Petro price hike need not be reduced: EAC

The Prime Minister’s Economic Advisory Council today said that there was an almost negligible 0.4% impact on the whole sale price index on account of the recent hike in petrol and diesel prices and told the Prime Minister that there was no need to rollback the price hike.

The Prime Minister’s Economic Advisory Council (EAC) today said that there was an almost negligible 0.4% impact on the whole sale price index on account of the recent hike in petrol and diesel prices and told the Prime Minister that there was no need to rollback the price hike.

The EAC headed by C. Rangarajan today met Prime Minister Manmohan Singh and while taking stock of the economy said that given the current fundamentals of the economy, the country can grow between 7-8%.

After an hour long meeting with the PM, Rangarajan, while commenting on the oil price hike, said that despite the hike in petrol and diesel prices, there was still a substantial amount of subsidy that was involved in the retail prices.

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Rangarajan said even after taking into account the petrol price hike, inflation was expected to be 5-5.5% and that the direct impact of the hike on inflation would be 0.4%. He said that the total impact, including the cascading effect of increase in prices of other commodities and services would be around 1%.

The government had come under severe criticism from the opposition, allies and even from the Congress party itself after it hiked the price of petrol and diesel by Rs 4 per litre and Rs 2 per litre respectively.

The EAC specifically also discussed the stock market movement and said that the continued down slide was a matter of concern as the downslide witnessed over the past few days was less to do with global conditions and more do with the domestic issues. Rangarajan said that the downslide could impact the investment levels as it had a direct impact on the primary market.

A major part of today’s meeting centred around the performance of the agriculture sector as well as the much needed reforms in the infrastructure sector. It was pointed out that the economy could still clock 7-8% growth even if agriculture clocked 2% growth. During the last quarter of 2005-06, a close to 4% growth in the agriculture sector propelled that quarter’s overall growth to beyond 9%.