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With political parties, including the Left, opposing hike in fuel prices, Prime Minister Manmohan Singh on Monday warned that the government is not in a position to fully insulate the consumer from the impact of rising oil prices.
"We cannot allow the subsidy bill to rise any further. Nor do we have the margin to fully insulate the consumer from the impact of world commodity and oil price inflation," the prime minister said, addressing the Assocham's annual meeting in New Delhi.
Calling for a wider political consensus, Singh said the government could insulate poor people 'up to a point' and economic pricing of oil was essential to sustain growth.
However, he expressed confidence that the Indian economy would continue to grow at 8 per cent and above despite global slowdown.
India has maintained the economic growth of 9 per cent and above for the last three years.
While the government would remain focused on reversing the upsurge in inflation, the prime minister said, "We have to learn to husband our fiscal resources prudently."
Seeking industry support for taming the price rise, Singh said, "I do not wish to see a return to era of blind controls. . . At the same time, we have to have the fiscal means to protect the poor from adverse impact of inflation."
Despite the crude oil prices ruling in the range of $127 a barrel and causing huge losses to the state-owned oil marketing firms, the government has not been able to pass on the burden due to lack of political consensus.
There are differences within the government also as to how to resolve the crisis. The finance ministry and the Left parties are opposed to duty cuts sought by the petroleum ministry.
The prime minister pointed out that the government had not raised kerosene prices for the past four years, while diesel and LPG prices were only marginally revised, and petrol prices remained lower than world prices. In the case of other natural resources, especially water, the country has altogether been imprudent.
"The situation cannot continue forever. We need wider political consensus to adopt more rational economic policies," he said.
The prime minister also expressed concern about the impact of rising oil, commodity prices and protectionist policies of developed economies on liberalisation.
He said many developing countries have been forced to impose control on commodity exports and increase subsidy on imports due to big rise in food prices.
"We need a global compact so that rising food prices do not threaten the process of global integration."
The unrelenting rise in crude oil prices threatens to disrupt the development process in oil importing developing countries, he said.
Referring to the middle-path of economic reforms adopted by the country, he said the Indian route to globalisation has been more stable and avoided many pitfalls that other developing countries got into.
It bears a testimony to the wisdom of 'the slow and steady wins the race.' "The Indian tortoise will win the race against many Asian hares," he noted.
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