As the government prepares to face a belligerent Opposition in Parliament on the issue of price rise, Prime minister Manmohan Singh, in his speech to the National Development Council (NDC) here on Saturday, said he expected inflation to be down to 6% by December on the expectations of a good monsoon. The Prime Minister also called for a cut in the untargeted subsidies and losses in the public sector to keep the fiscal consolidation plans of the government on track without any reduction in the Plan expenditure.
?The present high rate of inflation is mainly due to food price inflation. The government has taken a number of steps to curb inflation. With a normal monsoon, which is the expectation at present, the rate of inflation in food prices will abate in the second half of the year. We expect to see inflation in wholesale prices come down to around 6% by December,? he said.
?We have to reduce our fiscal deficit in the coming years and this means we must find non debt resources on a much larger scale if we wish to finance a substantial size plan,? Singh said while addressing the the government?s top policy forum.
In one of the sharpest cut in the fiscal deficit, the government is targeting to bring down the deficit to 5.5% in current year from 6.8% in the previous year.
Hinting at targeted subsidisation of food, fuel and fertiliser in days to come, Singh said operationalisation of the unique identification number scheme, together with developments in information technology, provides an opportunity to target subsidies effectively to those who really need and deserve them.
According to Singh, timely implementation of the goods and services tax and other reforms in tax structure and tax administration are key to ensure better resource mobilisation. A few days ago, finance minister Pranab Mukherjee proposed a three-tier structure for the new direct tax regime ? 20% for goods, 16% for services and 12% for essential items ? which will be implemented from April next year.
While addressing the council?s meeting on Saturday, Mukherjee assured state governments that any losses suffered by them due to GST will be made good by the Centre. However, chief minister?s of the BJP-ruled states who addressed the meeting, raised concerns about states? autonomy and demanded that the GST norms be tweaked to allow them to levy taxes over and above it. The 13th Finance Commission in its recommendations had asked the Centre to set aside Rs 50,000 crore to compensate states for possible revenue loss from GST rollout.
Sharing the concerns raised by his economic advisory council in the report released on Friday, the Prime Minister said that the high level of losses in the power sector is not sustainable. The losses arising from low-levels of tariffs for some categories of consumers combined with high aggregate and commercial losses have been as high as Rs 40,000 crore in the last financial year.