Do it already

At times like these,brave decisions will need to be taken on economic policy. We have,after all,just avoided a global depression and we are still,certainly,trying to avoid another dip in global output. And,at the same time,we dont want to face the prospect of decades paying for our stimulus,as the British government now claims as it cuts public services. But will India be able to take some of these essential calls? Given how the group of ministers sitting to decide on fuel prices has decided to punt the decision forward yet again,the outlook isnt as bright as one would like.

Remember,following the recommendations of the Kirit Parikh committee,and linking domestic oil prices tightly to the actual,world price of oil,is as close to an economic no-brainer as there is in the world of policy. Indias deficits are unsustainable. And,as the world looks at horror at the increasingly oil-slicked waters of the Gulf of Mexico,surely everybody now realises that the supply of fossil fuels is too variable to continue to be subsidised by governments that are scraping the bottom of the money barrel. Yet,for one reason and another,the world price of oil is not too high right now,meaning that any adjustment need not be too sharp. Nor do Indias projected finances for the coming year properly take into account an almost inevitable escalation in the price of oil,possibly back to near 100 a barrel in the next couple of months. Each of these many reasons is enough reason to free oil pricing now. And yet the group of ministers has ducked out of the decision.

Why? Is it because of fear of inflation? But theres every indication that inflation is being driven by other factors,which we need to isolate and identify. Nor does subsidising oil take higher prices out of the system it merely ensures that the inflationary channel is through higher deficits,not directly through higher oil prices. Is it perhaps because,as Petroleum Minister Murli Deora told reporters,that four ministers were not present at the groups? If so,thats a dereliction of duty that should have consequences. Either way,before this month is out,the UPA has to show that it has the steel in its spine to get us through these dangerous months by freeing oil prices before it is too late.