New Delhi – Justifying the recent decisions on FDI and diesel price hike, Prime Minister Manmohan Singh today said the time has come for “hard decisions” and asked the countrymen not to be misled by those trying to confuse them by spreading fear like in 1991.
In a rare televised address to the nation, he insisted that the concerns over allowing FDI in retail were “baseless” as there is enough scope for big and small retailers to grow.
Noting that fears had been created in 1991 when he as Finance Minister had initiated economic reforms, Singh said those behind the scare “did not succeed then” and “they will not succeed now”.
He justified the hike in diesel price and cap of six cylinders on subsidized LPG, saying these were required in the difficult economic situation and to avoid increase in fiscal deficit that would lead to steep rise in cost of essential commodities.
“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 interest, and protect the long-term future of our people,” Singh said.
“We have much to do to protect the interests of our nation and we must do it now. At times, we need to say ‘no’ to the easy option and say ‘yes’ to the more difficult one. This happens to be one such occasion. The time has come for hard decisions,” he said, adding, “for this, I need your trust, your understanding and your cooperation.”
He recalled that the last time the nation faced this problem was in 1991. “Nobody was willing to lend us even small amounts of money then. We came out of that crisis by taking strong, resolute steps. You can see the positive results of those steps,” he said.
“We are not in that situation today, but we must act before people lose confidence in our economy,” Singh said.
Underlining that the government was at a “point where we can reverse the slowdown in our growth”, he said, “We need a revival in investor confidence domestically and globally. The decisions we have taken recently are necessary for this purpose”.
He made the 15-minute address to the nation in Hindi and English against the backdrop of uproar over the recent decisions to allow FDI in multi-brand retail, Rs 5 increase in diesel price and cap on subsidized LPG cylinders.
A tough-talking Prime Minister said, “money doesn’t grow on trees. If we had not acted, it would have meant a higher fiscal deficit.”
He told the nation that he would do “everything necessary” to put the country back on the path of high and inclusive growth.
“But I need your support. Please do not be misled by those who want to confuse you by spreading fear and false information,” Singh appealed to the countrymen, adding he had full faith in their wisdom.
“As Prime Minister of this great country, I appeal to each one of you to strengthen my hands so that we can take our country forward and build a better and more prosperous future for ourselves and for the generations to come,” he said.
Contending that his government has been voted to office twice to protect the interests of the ‘aam admi’, the Prime Minister said, “We must ensure that the economy grows rapidly” which would generate enough productive jobs for the youth of our country.
“Rapid growth is also necessary to raise the revenues we need to finance our programmes in education, health care, housing and rural employment,” he said.
While justifying the hard decisions of the government, Singh referred to the “great difficulty” being encountered by the world economy with even the US and Europe struggling to deal with an economic slowdown and financial crisis. Even China is slowing down, he said.
“We too have been affected, though I believe we have been able to limit the effect of the global crisis,” Singh said. Recalling that in the past eight years the economy has grown at a record annual rate of 8.2 percent, the Prime Minister said the government has ensured that poverty has declined much faster, agriculture has grown faster, and rural consumption per person has also grown faster.
“We need to do more, and we will do more. But to achieve inclusiveness we need more growth. And we must avoid high fiscal deficits which cause a loss of confidence in our economy,” Singh said.
Referring to the crisis witnessed in 1991, he said, “I would be failing in my duty as Prime Minister of this great country if I did not take strong preventive action.”
He said he was determined to see that India is not pushed into a situation like the one encountered by Europe where many countries are not able to pay their bills, have to cut wages or pensions and are looking to others for help.
“But I can succeed only if I can persuade you to understand why we had to act,” Singh underlined. Referring to the decision to allow foreign investment in retail trade, he said, “Some think it will hurt small traders. This is not true.”
He noted that organised, modern retailing is already present in the country and growing, with all major cities having large retail chains.
Talking specifically about Delhi, Singh said it has many new shopping centres but has also seen a three-fold increase in small shops in recent years.
“In a growing economy, there is enough space for big and small to grow. The fear that small retailers will be wiped out is completely baseless,” Singh asserted.
He said the opening of organised retail to foreign investment will benefit farmers.
“According to the regulations we have introduced, those who bring FDI have to invest 50 percent of their money in building new warehouses, cold-storages, and modern transport systems.
“This will help to ensure that a third of our fruits and vegetables, which at present are wasted because of storage and transit losses, actually reach the consumer. Wastage will go down; prices paid to farmers will go up; and prices paid by consumers will go down,” he said.
The growth of organised retail will also create millions of good quality new jobs, the Prime Minister said.
On opposition to the FDI decision by some political parties, he said, “That is why state governments have been allowed to decide whether foreign investment in retail can come into their state. But one state should not stop another state from seeking a better life for its farmers, for its youth and for its consumers.”
Citing the success of opening manufacturing to FDI in 1991, Singh said many were worried but today Indian companies are competing effectively both at home and abroad and investing around the world.
“More importantly, foreign companies are creating jobs for our youth — in Information Technology, in steel, and in the auto industry,” he said, adding “I am sure this will happen in retail trade as well.”
Referring to the hike in diesel prices and the cap on subsidized LPG cylinders, Singh said India imports almost 80 percent of oil and its prices in the world market have increased sharply in the past four years.
“We did not pass on most of this price rise to you, so that we could protect you from hardship to the maximum extent possible,” he said, adding that as a result, the subsidy on petroleum products has grown enormously.
He said subsidy on petroleum products was Rs 1,40,000 crore last year and if the government had not acted, it would have been over Rs 2,00,000 crores this year.
“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 and a loss of confidence in our economy. The prices of essential commodities would rise faster. Both domestic as well as foreign investors would be reluctant to invest in our economy. Interest rates would rise. Our companies would not be able to borrow abroad. Unemployment would increase,” he said. On increase in diesel price, Singh said, “We raised the price of diesel by just Rs 5 per litre instead of Rs 17 that was needed to cut all losses on diesel.”
He noted that much of diesel is used by big cars and SUVs owned by the rich and by factories and businesses.
“Should government run large fiscal deficits to subsidize them? We reduced taxes on petrol by Rs 5 per litre to prevent a rise in petrol prices. We did this so that crores of middle class people who drive scooters and motorcycles are not hit further,” he said.
On LPG, he said a cap of 6 subsidized cylinders per year was put as almost “half of our people, who need our help the most, actually use only 6 cylinders or less. We have ensured they are not affected. Others will still get 6 subsidized cylinders, but they must pay a higher price for more.
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