PM defends diesel price hike and decision on FDI

Warning against the country slipping back into the 1991 economic crisis, Prime Minister Manmohan Singh on Friday said time has come for "hard decisions" to put the country on the path of high and inclusive growth.

Seeking trust and understanding of the people in a televised address to the nation, he asked them not to be misled by those who want to confuse them by spreading fear and false information like they did unsuccessfully in 1991.

Speaking against the backdrop of the Trinamool Congress withdrawing support to the government on FDI and diesel price hike and the opposition from other parties, Singh said, "we have much to do to protect the interest of the nation and we must do it now.

"At times, we need to say 'no' to the easy option and say 'yes' to the more difficult one. This happens to be one such occasion. The time has come for hard decisions," he said.

"For this, I need your trust, your understanding and your cooperation," he said justifying the Rs5 hike in diesel price, cut in sup-ply of subsidised LPG cylinders and allowing FDI in multi-brand retail.

Referring to the ballooning oil subsidy which would have touched Rs2 lakh crore this year, up by Rs60,000 crore last year, he asked where would the money for this have come from.

"Money does not grow on trees. If we had not acted, it would have meant a higher fiscal deficit. That is an unsustainable increase in government expenditure vis-a-vis government income," he said.

Painting a grim picture, Singh said if unchecked this would lead to a further steep increase in prices and loss of confidence in economy.

The prices of essential commodities would rise further. Both domestic as well as foreign investors would be reluctant to invest in our economy. Interest rates would rise, our companies woiuld not be able to borrow abroad and unemployment would increase, he said.

Drawing comparisons with the 1991 situation when he unleashed a wave of reforms, he said nobody was willing to lend even small amounts of money then.

"We came out of that crisis by taking strong, resolute steps. Your can see the positive results of those steps. We are not in that situation today, but we must act before people lose confidence in our economy," he said.

Noting that the world is not kind to those who do not tackle their own problems, Singh said many European countries are in that position today. They cannot pay their bills and are looking to others for help. they are having to cut wages or pensions to satisfy potential lenders, he said.

"I am determined to see that India will not be pushed into that situation," he said, adding, "But I can succeed only if I can persuade you to understand why we had to act."

On the diesel price hike, he said it was done by just Rs5 a litre instead of Rs.17 that was needed to cut losses on diesel.

"Much of diesel is used by big cars and SUVs owned by the rich and by factories and businesses. Should government run large fiscal deficits to subsidise them ?" he asked.

On the annual cap on subsidised LPG cylinders, he said, "almost of our people, who need our help the most, actually use only 6 cylinders or less. We have ensured they are not affected. others will still get 6 subsidised cylinders, but they must pay a higher price for more."

In his rare televised address to the nation, the Prime Minister insisted that the concerns over allowing FDI in retail were "baseless" as there is enough scope for big and small retailers to grow.

Noting that fears had been created in 1991 when he as Finance Minister had initiated economic reforms, Singh said those behind the scare "did not succeed then" and "they will not succeed now".

"No government likes to impose burdens on the common man... At the same time, it is the responsibility of the government to defend the national interest, and protect the long term future of our people," he said.

Underlining that the government was at a "point where we can reverse the slowdown in our growth", he said, "We need a revival in investor confidence domestically and globally. The decisions we have taken recently are necessary for this purpose".

In his 15-minute speech first in Hindi and then in English, Singh said his government has been voted to office twice to protect the interests of the 'aam admi'.

"Rapid growth is also necessary to raise the revenues we need to finance our programmes in education, health care, housing and rural employment," he said.