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Tuesday, March 2, 2010

We can't always follow populist fiscal policies: PM

Prime Minister Manmohan Singh virtually ruled out any rollback in the price hike of petrol and diesel as announced in the budget, saying that the direct effect of the hike in fuel prices on wholesale prices will be no more than 0.4 percent.

'Any increase in prices does hurt some section of people, but we have to take a long term view. We cannot save people from inflation if we follow all along populist fiscal policies,' Manmohan Singh said. He was speaking to the media Monday on board the special aircraft that brought him back to New Delhi from his three-day official visit to Saudi Arabia.

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'The direct effect of the increase in fuel prices on wholesale prices will be no more than 0.4 percent,' he said.

'There is some escalation (in prices) but my hope is that now that the new rabi (winter) crop coming into the market, prices that have caused a great degree of concern like those of wheat, sugar, oilseeds, pulses will see some moderation and that the economy has the capacity to absorb this hike in oil prices without setting in motion any inflationary spiral.'

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The prime minister said that if these populist policies were persisted with for a long time to come, these sooner or later 'will lead to the erosion of the investment climate, will lead to a erosion of our capacity to create new jobs and will lead to the erosion of our capacity to invest in our flagship programmes for our poor people'.

'So, we have to balance these factors,' he said.

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