Diesel price hike & LPG capping gives space to RBI to act: Montek Singh

NEW DELHI: The Planning Commission deputy chairman Montek Singh Ahluwalia has strongly backed increase in diesel prices and capping of LPG cylinders to households and said the move has created substantial fiscal space for the RBI to act.

“I am sure RBI will take this into account,” Ahluwalia said. RBI is is meeting on Monday to review the country’s monetary policy and most economists do not expect the central bank to cut rates in view to high inflation.

Ahluwalia, who batted for deregulation of diesel and petrol prices, said international ratings agencies should also take note of the steps taken by the government late Thursday.

“Enough credible fiscal space has been created....Rating agencies perception should also change,” he said adding that the country needed “lot of tough decisions” to return to growth path.

" Diesel price hike is a tough decision and we need lot of tough decisions to get to 8% growth rate,"

"I think they have taken a very important step. I am very glad that the government has taken this decision.....This is not complete deregulation. Both petrol and diesel price should be deregulated. It has to be done in steps," he said.

Acknowledging opposition to the government's decision, he said, "Any effort to raise price always creates problem. We should not have an impression that not raising diesel prices is a costless option”.

"Energy security is very important. We need to economise energy. We need to put resources in exploration, production and development," he said adding that lack of movement in this regard could condemn the country to low growth rate.