‘More effort needed to reduce govt subsidies’https://indianexpress.com/article/news-archive/web/more-effort-needed-to-reduce-govt-subsidies/

‘More effort needed to reduce govt subsidies’

C Rangarajan said he was sure it would be maintained at 4.8 per cent of the GDP.

More efforts are required to reduce the subsidy and government needs to set an overall quantity for it,prioritising the areas that need greater focus,Prime Minister’s Economic Advisory Council (PMEAC) Chairman C Rangarajan has said.

He also said that India will be able to contain the fiscal deficit at 4.8 per cent for which higher growth is a must so as to increase government revenues. “I think there has been an effort to reduce subsidies (given by the government). We need to do more. For example,all subsidies have been very important,” Rangarajan told reporters at the sidelines of a function today.

“Then a decision was taken to take out subsidy to petroleum and it was fixed according to market level. Diesel prices in the course of next few months will also get regularised. In the sense,it will be market driven,” he said.

He added: “We should have a fix on the total quantum of subsidies and adjust other subsidies,if they are critically important. What is really needed is the fix on the total subsidy. It is for the government to decide which subsidy will take priority over other subsidy.”


On the decision to allow diesel prices to be market driven,Rangarajan said the plan was for a 50 paise increase every month. Due to the sudden rupee depreciation (against the US Dollar),the adjustment became higher. “Therefore,in principle,it has been accepted that diesel price will also be related to price of crude oil.” On controlling the fiscal deficit,Rangarajan said he was sure it would be maintained at 4.8 per cent of the GDP and that going ahead,growth would be an important factor in contributing to higher tax revenue to contain it.

Planning Commission deputy chairman Montek Singh Ahluwalia said that India should reduce its debt within 5-6 years by putting fiscal policy on the right path,but “draconian changes” are not the answer. “In the next five or six years,the objective should be to bring the gross debt to GDP ratio down that means fiscal deficit also must go down.”