REALITY OF DIESEL SUBSIDY

In the current scenario, the fiscal deficit of India is ruling at 5.9% in 2012. The economic burden seems to be increasing  on the government. Reasons are being cited for it as less-efficient government spending, lower tax etc. However, the "curse" of diesel subsidy needs to be paid attention. There has been situations when the economic changes were observed like hike in petrol prices, lowering of petrol prices etc but no attention was given to the diesel prices. According to C Rangarajan (Chief Economic Adviser of PMEAC), Diesel price should be increased in phase because any such step directly effect common man the most.
Why we need a revision of Diesel Prices?
1. Subsidy means that the extra burden has to be borne by the government which directly affects the fiscal deficit.
2. The inefficient use of subsidized goods just because it is sold at a cheaper rate. Hence the profit base of companies (Specially the Public sector ones) gets affected. ( One must keep in mind that our PSUs are far behind as compared the private markets).
3. Adulteration is a burning issue in Indian Market (The reason is absolutely clear).
In this fiscal year, due to "drought" in as many as 6 states of India, Diesel sales have gone up exponentially. In july itself, the sales have increased by 13%. For every litre , the under-recovery for a company is Rs 14 and hence they have been constantly pushing the government for reducing the subsidies. In the first quarter itself, the under-recovery touched Rs 47,811 crore which is surely a concern for their profitability in the long rum and the capital expenditure. The increase is sales have been also due to the power shortage in many parts of India (Around 21 states got affected).
It is equally true that these steps will invite protests from many corners of India ( May be even by the opposition parties and the state governments), but future development must be well understood. Importantly, we should not forget the economic policy of 1990 (THE FAMOUS LPG CONCEPT), which transformed India into a global Economy. Had the economic review policy of 1990 not been adopted, our economy would have remained a closed one, Government based, no role for private parties, we could not have been able to compete with the global economy.
It is the right time to bring some regulation in economic policy as far as diesel is concerned for sustaining a comparable growth in future.  

POLITICONOMICS

At present India is undergoing a downfall phase be it Political or economic scenario. Recently concluded civil society movements led by Anna Hazare, Ramdev and supporters even challenged to throw out the government in the next election of 2014. However, it is the “Time” which will decide the fate of the government or the country. But, it is the general public or the so called “Aam junta”, are the real victims in such situations. The political instability leads to the slowdown of economy because investors prefer to invest in those countries having solid political platform. Perhaps, it is the main reason (no doubt there are other reasons also) for having less foreign investment in India for this fiscal year. Since we are in a phase of globalisation, the “negative mood” of investors have serious impact on the economy of our country. The fiscal deficit increases and may get out of control at some point of time. The very recent “power crisis” in 21 states affecting nearly 60 crore people across the country is the result of political failure. The 2G scam, the coalgate issue, Adarsh Housing Scam etc. have added to the sufferings of the people of our country. The negative impact of consistent increase in price (inflation) of very basic commodities on the middle class goes without saying.The ongoing issue of North-Eastern people in which around 4 lakhs became homeless, 77 had lost their lives (as on 8th august), have just added to the list of miseries for the people of our nation.

What about the economy?

In the last fiscal, the GDP was 6.5%. But, the present scenario and the predictions of economists suggest that in the fiscal year 2012-2013, the expected GDP will be around 6%. The “Credit Rating Agency” namely Fitch, Standard & Poor even threatened to downgrade the India's sovereign credit rating to ‘speculative' from the lowest notch of ‘investment' grade. It even predicted the growth of India in the next fiscal to be 5.5%. However, being positive, the Chairman of Prime Minister Economic Advisory Council (PMEAC) C Rangarajan projected it to be 6.7%, which was also believed by our PM Dr. Manmohan Singh. Price rise at the time of lower growth adds to the woes of the nation. RBI Governor Dr. D Subbarao believed that inflation is the key at the present situation and hence he is not in the favour of reducing rates such as CRR (Cash Reserve Ratio). He believed liquidity is not the barrier for the growth at present but it is the investors’ negative sentiment, infrastructure inadequacy etc. which comes under the purview of government policy. So, the responsibility lies with the government to tackle the situation to bring back the growth chain on the track.

What needs to be done?

The situation cannot be tackled just by increasing foreign investment or reducing bank rates, but it should be a long-term plan. Infrastructure improvement like roads, railways, ports, airports etc. needs to be looked upon and we need many Golden Quadrilaterals (60,000 cr) type project to connect the entire nation. Electricity, power are some other requirements. Manufacturing growth is the crucial tool. India's GDP is mainly based on service sector, but, in the long run, we need manufacturing sector to play more important role. But, for it to have sound growth, we need power connections everywhere. Many small and medium scale industries cannot afford to have “automatic power plant” which can supply power to them in case of power cut because of huge investment. It goes without saying that corruption is also a factor for the instability of the economy. According to a reader, Corruption is like a “Tax” which goes to the private players instead of the government and in the way increases the price of goods. But, saying is much easier than doing. Before criticizing the government, we should also look upon our responsibilities as a citizen. We are also responsible for wastage of power, water and other resources of our nation. Hence, at all levels, the whole country has to work together, the citizens has to work in co-ordination with the government (Don’t forget we have the voting rights, hence we are responsible for selecting our representatives) to see a better morning for the coming years, generations to come.

Issues

Hi Everyone...

I am new to the world of Blogging... I found it very interesting to put forth our view in a nutshell. I would like to let you all know that I will be mainly writing on the recent national issues which includes economic, social, security issues. I hope my journey of blogging will be an interesting and successful one. With this positive note, I wait for my first-hand experience of writing on an issue having national importance.