Planning Commission deputy chairperson Montek Singh Ahluwalia on Friday backed the diesel price hike saying the country needs a lot of tough decisions to cut down fiscal deficit so that there is more money available for development.
"Diesel price hike is a tough decision and we need lot of tough decisions to get to 8% growth rate," he said. The plan panel had set a target of 8.2% growth for the 12th plan with an aim to growth at nine percent in the terminal year of the plan, 2017.
Ahluwalia said diesel price hike was among several tough decisions the government needs to check growing fiscal deficit, which would mean less money for development. "Diesel price needs to be totally regulated to align with global prices," he said, adding that any increase in diesel prices will not have much impact on inflation.
One immediate implication, he felt, fiscal consolidation would have is to provide space to the Reserve Bank of India to reduce interest rates, a demand being made by the industry for the long time to attract investment. RBI would be announcing its mid-term monetary policy next week.
The key economic changes initiated by the government this week would not just foster growth but will also push to meet the 12th plan economic targets including agriculture growth of 4%, manufacturing growth of 10%, reducing poverty by 10 percentage points and create 50 million new work opportunities.
Ahluwalia said the government aims to continue with its inclusive growth with more focus on health and education. "We have more than doubled the fund allocation projections for the 12th plan. Education would be getting the second highest allocation," he said.
The 12th plan documents talks of having a National Health Mission, by merging the existing National Rural Health Mission. It also talks about providing free medicines in government hospitals and upgrading a hospital in every district to a medical college.
In education, the government aims to increase the allocation from existing 1.2% of the GDP to 1.5% of the GDP by end of the plan period. With it, the target is to ensure every child gets education for eight years and Gross Enrollment Ration in higher education increases to 25.2% by end of the plan.
The deputy chairperson also said that the panel wanted the Central funding to the states to be flexible so that the local governments can use the funds as per ground conditions.