Rangarajan for early action on diesel decontrol, FDI

The government should take early action on decontrol of diesel prices and move ahead with its proposal to allow foreign investment in multi-brand retail, said Prime Minister's key economic adviser C Rangarajan.
 
Admitting that the days of 'big-bang' reforms are over, Rangarajan, who is Chairman of the Prime Minister's Economic Advisory Council (PMEAC) said that allowing foreign indirect investment (FDI) into retail and civil aviation can be done through executive orders outside Parliament.
 
"I do hope actions in terms of changing prices of petroleum products, more particularly diesel, will come through as early as possible. That is extremely important," he said at a conference on India's economic policy here.
   
Rangarajan said decontrol of diesel prices was necessary to contain fiscal deficit, which had ballooned to 5.76% in 2011-12 fisal.
   
Although government has taken an in-principle decision to decontrol diesel prices, it has not been able to implement it fearing adverse reaction. Decontrol would give freedom to state-owned oil companies to fix the price of diesel, which currently is decided by the government. The government has, however, decontrolled the prices of petrol.
 
Rangarajan said political consensus has to be built up "slowly" for increasing foreign investment in insurance and pension sector.
    
"I do not think that it is necessary or there is a case for big-bang reform. So, I would say that we really need to look at FDI and possibly FDI in retail, in civil aviation can be done without going to Parliament. It can be done by executive decisions," he said.
 
The government has failed to raise FDI cap in insurance and pension sector to 49 per cent, from 26% and open the multi-brand retail segment to foreign players because of opposition from its coalition partners.

Rangarajan said there was a need to control fiscal deficit at the budgeted level, for which the government has to take some administrative measures
 
"I strongly feel we need to contain fiscal deficit. That is the only way to maintain credibility of the government. It is necessary to maintain fiscal deficit, maintaining the fiscal at the budgeted level will mean that we need to necessarily take actions, mostly administrative," he said.
    
The government targets to bring down the fiscal deficit to 5.1% of GDP in the current fiscal, from 5.76% in 2011-12.
   
High commodity prices in the international market and the inability of the government to adjust domestic prices to global level is putting pressure on the central exchequer.