Prime Minister Manmohan Singh said on Saturday the country was spending far too much on funding subsidies in the name of equity, with neither equity nor efficiency objectives being met.

The prime minister was speaking at an event in New Delhi on Saturday to mark 50 years of the Institute of Economic Growth, an autonomous research institution located in the Delhi University campus. It is not the first time that Singh has flagged subsidies as a policy issue.

Today's comments reinforce the opinion that the government is likely to do something on this front in the coming Budget.

In fact, finance ministry officials were also scheduled to meet today to discuss the subsidy burden, with sources adding that the meeting is a part of early consultations prior to the Union Budget scheduled for February 29.

Just over a month back, Singh had hinted while addressing the full Planning Commission meeting that the government needs to address the problem of mounting subsidies in food, fertilizers and petroleum. "Over Rs 1,00,000 crore will be spent this year alone on these three items," Singh had said.

Today, he pointed out that agriculture alone could not provide livelihood to over two-thirds of the country's population. "We need new pathways to increase agriculture output and productivity," Singh said.

"We need policies that will promote non-farm employment," he said, adding that the country needed rapid expansion of labour-intensive manufacturing industries.

Regretting that "mixed economy" often becomes "mixed-up economy", Singh said the country needs to look for a new middle path for development that combines the efficiency considerations of the market with the equity considerations of a liberal polity.

Singh also called for more rational solutions to deal with the rural-urban divide and inter-regional imbalances. "Inter-regional imbalances have both economic and political causes and consequences and we cannot allow these imbalances to persist," he said.

The prime minister further emphasised on moving from a situation in which people migrate to places where jobs exist, to a situation where jobs migrate to where the people live.

He also underlined the need for accelerating investments and savings rate to sustain the growth momentum. Singh further said that India's development path should be environmentally sustainable and that the country must pay more attention to issues related to energy security.

Stressing the need for renewed commitment to reforms, Singh expressed the hope that India would be able to catch up with South-East and East Asia by implementing the strategy spelt out in the 11th Five Year Plan.