India is always known as elephant against China which is popularly known in circles as crouching tiger. A fast paced tiger pitted against a slow moving elephant. But over these 4-5 years the elephant has been pretty asleep while tiger has been roaring all thorough these years. BRICS- the group of emerging countries has been actually slowing down. Lots were being said about the Once popular and hero of India in 90s- Mr. Manmohan Singh, a well renowned economist who made India usher in a new world of emerging country. Three years of silence was supposedly lots, finally he meekly-roared, puts some courage, puts his defiant foot forward. After 3 years of lull, two days made history in UPA-2. First increase in diesel price by 6 rupee, secondly, putting a cap on the subsidized LPG cylinders, Thirdly, allowing 51% FDI in retail and 49% FDI in civil aviation industry. All these measures made withing 24 hours after a washout of monsoon session of parliament was tremendous about turn by the Govt.
There is definitely Two perspective to the moves.
Govt perspective: Definitely fiscal deficit is a major concern which is getting to abyss at a fast pace. major oil companies are making huge losses on a daily basis where in all petroleum products govt provide huge subsidies be it petrol, kerosene, diesel or LPG. Definitely FDI in retail & Aviation shall mark a turn around in ailing airline industry and will boost retail trade in India with wal-mart like major players being part of Indian consumers. Govt claims to raise an additional Rs 20,300 crore for the Oil companies. Economist are all cheers for these measures. It might give kick start to all due reforms pending. Finally the so called ‘Policy-Paralysis’ has come to end. Market, elated with the news gained at SENSEX.
“The decision of the government to hike diesel prices and LPG (beyond six cylinders) are borne out of necessity. CII fully understands the economic compulsions for such a decision,” CII Director General Chandrajit Banerjee said in a statement.
“Diesel has larger weight than petrol, it (hike in petrol price) will have inflationary effect but it is a good decision. It will put pressure on inflation in short but in long run will have good impact on economy,” – Crisil Chief Economist D K Joshi
The middle class woke up to double whammy this morning. It has added further burden to already agitated Indians. At this juncture, when the prices of basic commodities are sky high and inflation is refusing to buzz despite all RBI efforts. it’s is expected to go up by another 0.40%. The aam aadmi, the common man is the one who suffers. He has his valid reasons. When the Govt is all down with plethora of corruption accusations and of misusing tax payers money on cases like 2G, Coal-gate, Common wealth games issues. What a common man is fed up of is that the Govt crib that it has no money to pay for the subsidies (implied) then what is happening to the tax payers money. All the money is being used for unnecessary study tours, for renovating Planning commission office STATE OF ART-TOILET (costing crores), for private presidential trip, so on and forth. Definitely, when the the hard earned tax payers money is being drained with such apathy, govt will be out of money to pay for other necessities. Common man is on the streets crying foul. Yesterday, I was watching The Newshour debate in a TV news channel- Times Now, where a well known corporate figure supported govt in case of putting cap on the number of subsidized LPG cylinders. His point of view was ” a PRUDENT family shall need at the most 6 cylinders in an year” that meaning half-a-cylinder per month. Well I have a doubt about what a prudent family means? Personally I alone use one cylinder in a one and a half month without much of cooking and never to waste. How come a prudent family(might be ONE member family) require only 6 cylinders in a year.
These announcement has added fuel to the already fuming relationship between Govt , allies and opposition. The two major parties supporting Govt at the centre SP, led by Mr Mulayam Singh Yadav & TMC led by Mamta have raised a strong concern against he policies announced. However, public knows the drama being played by them. They allready know that they are just pretending to showing empathy in front of public just in order to rake in the votes for coming elections- Public Posturing. The main opposition NDA has got another weapon to fire.
Government facing a double sword from political parties on one hand and public on the other is putting a brave face with one liner- ” Tough Times need Tough decisions”. This is hard to say what shall be the final outcome. I mean weather govt can stand to all these pressure or submit. The coming days will be testimony to it.
- The unusually large diesel price increase suggests that economic reformers have persuaded Congress leaders of the urgency of curbing the budget deficit – now about 6 per cent of gross domestic product for the central government alone – in order to stave off a threatened downgrade by credit rating agencies that would reduce Indian sovereign debt to “junk” status. – FT Article