Making a case for raising dieselprices and introducing more reforms, Prime Minister's EconomicAdvisory panel today said that containing fiscal deficit isnecessary to sustain high growth in the medium term.
"The process of fiscal consolidation is important fromthe point of view of sustaining high growth over the mediumterm. We really need to have a clear programme for containingsubsidies.
"Therefore, the need for adjusting the diesel prices orthe petroleum prices in line with what is happening to thecrude prices in the international market has becomenecessary," Prime Minister's Economic Advisory Council (PMEAC)Chairman C Rangarajan told PTI in an interview.
He suggested that the government should rationalise thesubsidies with a view to preventing wastage and helping needy.
"Priorities will have to be laid down by the governmentin terms of the type of subsidy which is considered to be mostimportant... Then the other subsidies will have to be reducedso as to ensure that overall subsidy is within the limits ofwhat is considered to be prudent," he said.
The government has pegged its outgo on food, fuel andfertiliser subsidies in the 2012-13 fiscal at over Rs 1.79lakh crore, lower than Rs 2.08 lakh crore spent last fiscal.
Finance Minister P Chidambaram had said that the subsidybill in the current financial year is expected to rise to 2.4per cent of the GDP from 1.9 per cent estimated in the Budget.
"We need a long term plan to bring down the subsidies asa proportion of GDP. At the same time we also need to ensurethat tax-GDP ratio also goes up. Therefore the process offiscal consolidation should be such as to ensure that over thenext 2-3 years, we get back to the (fiscal deficit of) 3 percent of GDP," Rangarajan said.
"Reforms need to be introduced in order to improve theproductivity of the system wherever competition is lacking, weneed to inject competition in those areas," he added.