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Economic panel opposes fuel price rollback

Prime Minister's Economic Advisory Council forecast the Indian economy to expand by 7-8 per cent this fiscal.

india Updated: Jun 08, 2006 23:04 IST

Prime Minister's Economic Advisory Council on Thursday forecast the Indian economy to expand by 7-8 per cent this fiscal, while strongly opposing any rollback in the recent hike in fuel prices.

"The fuel prices are still subsidised and there is no need to roll back the fuel price hike," C Rangarajan, chairman of the advisory panel, told reporters in New Delhi, after a meeting with Prime Minister Manmohan Singh.

A former governor of the Reserve Bank of India, Rangarajan had been advocating an upward revision in other fuels like kerosene and liquefied petroleum gas as well that were spared in the recent hike.

A cabinet meeting had on Monday raised prices of petrol by Rs.4 per litre and diesel by Rs.2 per litre in view of the sharp increase in international crude oil prices, while sparing cooking fuels.

Speaking about India's gross domestic product outlook, the noted economist said the fundamentals of Indian economy were still strong and that the country was on a high growth trajectory.

"I see no reason for the Indian economy not to grow at a satisfactory rate with continuation of economic reforms," he said, adding the panel's outlook was that the inflation rate would also remain between four-five percent this fiscal.

Reacting to the central bank's decision Thursday to raise its reverse repurchase auction rate by 25 basis points to 5.75 per cent, its former chief said interest rates had been hardening in India for sometime.

"This is an indication of tightness in the market."