PM firm on reform moves

Tough line: Diesel price hike, FDI to boost economy

Prime Minister Manmohan Singh on Friday defended his government’s recent reform measures, including diesel price hike and allowing FDI in multi-brand retail, on the ground that the steps were aimed at perking up the economy.

He also sought people’s trust, cooperation and understanding in taking some tough measures in the interests of the nation.

In his 15-minute long televised address to the nation, a day after the government notified major reforms taken last week that also included bringing foreign equity in airlines and broadcasting, the prime minister said the decisions were necessary in the wake of the difficult economic situation that had put pressure on the government’s revenues.

He also warned the people against being misled by “unfounded fears” spread by those opposed to the government’s pro-reform moves.
Singh said the hike in diesel prices and other measures were taken in the national interest and to protect the “long-term future of the people”.

As India imported 80 per cent of its fuel requirements, it was necessary to raise diesel prices to lower the government’s subsidies, which would otherwise have crossed Rs 2,00,000 crore.

“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. If unchecked, this would lead to a further steep rise in prices ,” he said.

“We raised the price of diesel by just Rs 5 per litre instead of the Rs 17 that was needed to cut all losses on diesel,” Singh said. “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 interests.”

He said that the government took a slew of steps last week to give further fillip to the economy. The steps evoked widespread protests and also led to the withdrawal of support from the Trinamool Congress, a key government ally.

But, undeterred by such agitations, the government went ahead with more such market-moving decisions and on Friday introduced a scheme to encourage small-time savers to invest in capital market, a move which saw the Sensex and the Nifty rise close to 2 per cent, the highest since July 2011, in a single-day trade.

Singh said the recent decisions were taken to revive investor confidence domestically and globally.

The Prime Minister described the fears against FDI in multi-brand retail as “baseless” and said there would be enough scope for the small ones to grow, even after the entry of overseas investors.

“All our major cities have large retail chains. Our national capital, Delhi, has many new shopping centres. But it has also seen a three-fold increase in small shops in recent years,” Singh said defending the FDI in retail.

He said fears were also spread in 1991 when he, as the finance minister, initiated economic reforms. But such fears did not last long.

“Those behind the scare did not succeed then. And they will not succeed now,” Singh said.

The prime minister added that reforms were necessary to ensure that the economy “grows rapidly, and that this generates” enough productive jobs for the youth of the country and raise revenues India needed to finance programmes in education, healthcare, housing and rural employment.

Fresh measures

*  Witholding tax on overseas borrowings cut to 5 pc from 20
*  Domestic companies to access cheaper funds from abroad and lowered tax on overseas borrowings
*  Borrowings could be done in the form of loan agreement or by way of long term infrastructure bonds
*  Amendments to be made in the Income Tax Act, 1961
*  In the Rajiv Gandhi Equity Savings Scheme, retail investors can now invest in stock market
*  Will cover stocks listed under BSE 100, CNX 100 and Navratna, Maharatna and Miniratna public sector firms
*  Investors with annual taxable income below  10 lakh to get 50 per cent tax deduction on investments up to 50,000

...AND THE IMPACT

*  The Sensex went up by 403.58 points, a 14-month high to close at 18,752.83 points
*  The rupee also gained a hefty 93 paise to close at over four-month high of  53.45