PM advocates further deregulation of fuel prices

Prime Minister Manmohan Singh on Friday hinted at tough fiscal measures, including possible deregulation of fuel prices, cut in subsidies and divestment, but cautioned that this could be done only if it was politically feasible.

The prime minister was speaking with the Indian media on Friday at the end of the two-day G20 Summit in the French tourist Riviera of Cannes.

Reiterating that he has always been an advocate of fiscal consolidation, he said that we must not live beyond our means as money simply does not grow on trees. He also added that government expenditure must also be curbed.

"We must thus seriously try to cut the fiscal deficit down to 4.6 per cent and bring the fiscal system back in balance, consistent with availability of resources."

Deregulation and decontrol is the direction India should move in, the prime minister said, adding that these (hike in petrol prices, for example) are sensitive areas and "we must allow markets to find their own level."

However, he emphasised that the direction of change is clear: India needs to move towards decontrol.

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The prime minister's comments assume significance in the context of stiff opposition to the hike in petrol prices under the deregulated system.

The prices of diesel, LPG and kerosene are still administered by the government and are not deregulated yet. Replying to a question on inflation, Singh said food inflation is a problem.

While the food grains prices are relatively stable, the problem was with the secondary and tertiary food items like vegetables, egg and fish.

This, he said, was a reflection of demand exceeding supply and was also a sign of increasing prosperity.

Singh said while analysing food inflation the increase in the net income by 8 per cent per annum and the population increase by 1.6 per cent should not be lost sight of.

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While heartily welcoming Pakistan's move to offer India the Most Favoured Nation status, he said that it was "a reflection of a new mindset, but we have to watch".

Stating that although it took Islamabad 17 years after India had given the same status to Pakistan, he quipped, "Der aaye, durust aaye (better late than never)."

"I am no astrologer," the prime minister said, while answering a question on how and how soon could the Indian government bring back black money stashed abroad by some Indians.

He said, "We operate in a world where not everything that happens can be to our liking and we deal with sovereign nations who will cooperate with us to the extent their laws allow them to."

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Saying that he could not guess as to the amount of black money stashed abroad by Indians, he reiterated that India was trying to get the money back but that there was no foolproof mechanism for it.

The only secure way to bring back India's wealth illicitly stashed abroad is by creating an environment that promotes India as the land of opportunity, keeps people from looking at greener pastures outside and discourages them from hoarding money in foreign havens, he said.

He said that he was "particularly happy to note that the Cannes communique endorses our call for increased banking transparency and exchange of information to combat tax fraud and evasion and other illicit flows. This was an important part of our agenda."

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Reiterating that Europe's prosperity is vital for India as it is New Delhi's largest trading partner and a slowdown in the Eurozone could affect capital and technology inflows into India.

The crisis in the Eurozone is a potentially grave threat to stability, he said.

G20 leaders, including Prime Minister Manmohan Singh, meeting in the rain-swept, tourist resort of Cannes in southern France, finalized an action plan on Friday to rapidly bring the world economy back on the growth track and agreed to boost the IMF's resources to help nations whose economies have been buffeted by a scary financial crisis.

The G20 could also give a vote of confidence to the rescue plan.

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With consensus veering to recognizing the International Monetary Fund as the central forum to help resolve the sovereign debt crisis that has hit the Eurozone, G20 leaders sought to raise more funding for the IMF to help calm jittery global markets and economies.

On the issues arising from the Greek crisis and the need to take protective measures to avoid a contagion that could affect developing economies like India, he said: "We had stated that management of the Eurozone crisis is primarily the responsibility of the Eurozone countries.

The Greek referendum announced earlier has been withdrawn and the Greek Government has indicated that it will proceed with implementing the package agreed earlier. We welcome this development, and hope that it will lead to an early resolution."

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His statement also mentioned: "On the issue of the contagion spreading to other Eurozone countries, Italy announced that it has agreed to a monitoring arrangement under which the IMF will report every quarter on Italy's performance under the existing programme agreed with the EU.

This is meant to send a signal of confidence to the markets."

The prime minister said, "We have taken the view that the IMF should keep the situation under close watch and we would support the IMF in playing an appropriate role to backstop preventive steps taken within the Eurozone.

The communique has stated that the G-20 will ensure that adequate resources will be available with the IMF.

This issue has been referred to the finance ministers for their next meeting in December."

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In a statement on the outcome of the Cannes G20 Summit, the prime minister said that the communique brings out the significant progress made in all the important areas.

"These include the outcome of the Mutual Assessment Process (MAP), progress in financial regulation and banking transparency, and improvements in the functioning of agricultural and energy markets, including futures markets.

The communique welcomes the IOSCO (International Organization of Securities Commissions) recommendations for improving regulation and supervision of commodity markets to manage volatility in prices."