PM says, diesel price hike is important step in right direction

New Delhi: Justifying the diesel price hike as an important step in the right direction, Prime Minister Manmohan Singh on Saturday said it will take “courage and some risks” to break the policy logjam and strongly favoured higher FDI and FII flows.

In his opening remarks at the full Planning Commission meeting for approving the 12th Plan document, the Prime Minister spoke of three economic scenarios of “strong inclusive growth”, “insufficient action” and “policy logjam” and said the country needed close to one trillion dollar investment in infrastructure sector during the period.

“I believe that we can make Scenario I possible. It will take courage and some risks but it should be our endeavour to ensure that it materialises. The country deserves no less,” he said.

Referring to high fiscal deficit and the need to bring it down, the Prime Minister said the 12th Plan projects a current account deficit of 2.9 percent of GDP.

“This must be financed mainly through Foreign Direct Investment (FDI) and Foreign Institutional Investment (FII) flows so that reliance on  external debt is limited. I believe we can attract the financing we need provided out fiscal deficit is seen to be coming under control and the growth momentum is regained”,he said.

Singh said, energy is a difficult area where policy needs a comprehensive review. “Rational energy pricing is therefore critical. Our energy prices are out of line with the world prices. The recent increase in diesel price is an important step in the right direction.”

The Prime Minister said the central message of the Plan is that the objectives can be achieved provided policies that will take care of weaknesses put in place. For the first time the Plan introduces three alternative scenarios.

Under Scenario I called “strong inclusive growth” one can expect a number of virtuous cycles to start operating leading to positive results on both growth and inclusion. “This is the scenario we should aim for”.