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Thanks to drought and inflation, diesel prices are unlikely to go up soon. And this indication has come from the man who, till now, has been supporting the price hike to check the fiscal deficit.
On his last day as the Chief Economic Advisor, Dr Kaushik Basu, said: “You have to look at the international prices. At the same time, drought-like situation will force the inflation to go up. So the Government will have to choose the right time to take a decision on diesel price hike.”
Diesel subsidy
The Basu-led committee has recommended capping the diesel subsidy.
According to the Petroleum Ministry, oil marketing companies are incurring under recovery of Rs 9.95 per litre.
Diesel has a weightage of 4.67 per cent in the calculation of wholesale price index (WPI) better known as headline inflation. Besides this, it has a multiplier effect as it is used in transportation.
Headline inflation
Talking about the overall inflation, he said that by September, headline inflation is likely to come down below 7 per cent. However, it is expected to go up again soon because of two reasons. First is the base effect and the second is drought-like situation.
At the same time, he felt that in the first two quarters (April-June and July-September), overall economic growth will remain subdued. But he was still optimistic.
“This has been a difficult year, but if you look at global landscape, we are doing well. Global turmoil has created opportunity and we should work hard to exploit them,” he added.
Governance reforms
He emphasised on the governance reforms. With reference to agitation against corruption, he said that though he liked the civil society’s pressure in this regard, a blueprint for removing the corruption needs a lot of professionalism.
“There is no doubt that corruption is a major problem. It cannot be eradicated completely, but can be reduced drastically. If you create another layer of bureaucracy to eradicate that, on the contrary, it will increase the corruption. The blueprint cannot have just another layer of bureaucracy,” he explained.
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