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Reforms Will Continue; Will Handle Allies, Says PM

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Unfazed by the uproar over FDI in retail and other tough decisions, Prime Minister Manmohan Singh on September 29 indicated that the government may continue with the reforms process and expressed willingness to discuss issues with allies.

"We will do what is good for the country... reforms are not one-off process," he said.

The Prime Minister was responding to questions on demands for rollback of decisions on FDI in multi-brand retail, diesel price hike and cap on subsidised LPG cylinders by the opposition.

When asked to respond to reservations expressed by allies that the recent decisions could hurt their electoral prospects, Singh said the issue could be discussed. "We are far away from elections."

Singh was talking to reporters on the sidelines of the swearing-in ceremony of new Chief Justice of India Altamas Kabir at the Rashtrapati Bhawan.

During the week, the UPA coordination committee had discussed the issue of FDI in multi-brand retail and other decisions.

When his attention was drawn to allegations by Gujarat chief minister Narendra Modi that FDI was aimed at pleasing the US, he responded saying, "What has the US got to do with this. We are not a country to be dictated by others."

Asked about attacks on him by Trinamool Chief Mamata Banerjee, who recently walked out of the UPA, he said, "I am not bitter about anything."

On the Supreme Court's opinion on the issue of auction of natural resources, the Prime Minister said, "We honour the judgement."

Economy On Fiscal Precipice
It was only on September 28 that a government panel headed by Vijay Kelkar had said in its report that Indian economy is poised on the edge of 'fiscal precipice'. India's fiscal deficit for the year 2012-13 is likely to hit 6.1 per cent of gross domestic product if corrective steps are not taken immediately, a report by the Kelkar panel said on September 28. However, one ray of hope was that India's current account deficit shrank by 24 per cent in the April-June period from an all time high in the previous quarter, returning the balance of payments to surplus after an earlier worrying slide towards dangerous territory.

The Kelkar panel recommended that India should try to completely deregulate diesel prices by the start of financial year 2014-15 as part of a strategy to cut its ballooning fiscal deficit. The panel also said India needed to take "urgent reform" in urea pricing.

However, playing the devil's advocate, the government said Kelkar Committee recommendations on sharp reduction in subsidies on petroleum, food and fertiliser was contrary to its policy of protecting the poor.

Department of Economic Affairs (DEA) secretary Arvind Mayaram had further said that the committee's recommendation of withdrawal of certain subsidies is in divergence with the stated policy of the government. The government, he clarified, has not yet taken a view on the recommendations of the Kelkar Committee, which was set up by Finance Minister P Chidambaram to suggest a roadmap for fiscal consolidation.

The government has invited comments of stakeholders on the Kelkar panel report.

The Committee, headed by former Finance Commission Chairman Vijay Kelkar, has suggested phased elimination of subsidy on diesel and LPG in the next four years and reduction in kerosene subsidy by one-third by 2014-15.

The report, submitted to the government on September 3, before the diesel prices were hiked in mid- September, also recommended increasing the price of fuel by Rs 4 a litre. It also suggested cooking gas prices should be raised by Rs 50 per 14.2 kilogram cylinder.

In mid-September, the government raised diesel prices by Rs 5 per litre, and limited the number of subsidised cooking gas cylinders for each connecton to six in a year.

India's fiscal deficit during the April-August period rose to Rs 3.38 lakh crore or 65.7 per cent of the full fiscal year 2012-13, government data showed on 28 September' 2012. During the same period in the last fiscal year, the deficit was 66.3 per cent of the budget target. Net tax receipts during April-August period stood at Rs 1.75 lakh crore and total expenditure was about Rs 5.7 lakh crore.
 
Read: No Moody Blues But Deficit Fear Stays    
 
In March, the government had budgeted a fiscal deficit of Rs 5.14 lakh crore or 5.1 per cent of the gross domestic product (GDP) for the current fiscal year.

Meanwhile, declining output of crude oil, fertilisers and cement pulled down the growth rate of eight key sectors of the industry to 2.1 per cent in August from 3.8 a year ago, indicating persistent sluggishness in the economy.

Read: Core Sector Growth Declines In August   

(BW online Bureau & PTI)