New Delhi, (IANS) The widening fiscal deficit will lead to loss of confidence in the Indian economy if unchecked as is the case with several European countries, Prime Minister Manmohan Singh said Friday.
In an address to the nation, the prime minister said his government recently hiked diesel prices and capped the number of subsidised cooking as cylinders in order to control the rising subsidy.
“The subsidy on petroleum products has grown enormously. It was Rs.1 lakh 40 thousand crore last year. If we had not acted it would have been over Rs.200,000 crore this year,” he said.
“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,” he said.
“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,” the prime minister added.
Manmohan Singh said that the Indian economy has grown at a record annual rate of 8.2 percent in the past eight years.
“We have ensured that poverty has declined much faster, agriculture has grown faster, and rural consumption per person has also grown faster,” he said.
The prime minister said there was a need to do more to achieve inclusive growth.
“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,” he said.
Manmohan Singh promised to the nation that he would do everything necessary to put the country back on the path of high and inclusive growth.