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Govt firm over fuel price despite protests

CNN-IBN
Mar 02, 2010 at 10:59am IST

New Delhi: The Union Government has decided to remain firm in the face of stiff opposition over the fuel price hike. This despite growing pressure from within the UPA as well.

Prime Minister Manmohan Singh categorically rejected demands made by allies Trinamool Congress and the DMK. He ruled out taking back the increase in petrol and diesel prices, saying the economy will be able to absorb the decision without inflation.

ALSO SEE No populism, no rollback in fuel prices: PM

"Any increase in prices does hurt some people, but we have to take a long-term view," he told reporters accompanying him on his way back home from Saudi Arabia. Singh made it clear following populist fiscal policies for long harm the economy.

Govt says the economy is able to absorb the hike in fuel prices.

"We cannot save people from inflation if we follow all populist fiscal policies. Sooner or later these populist policies if persisted for a long time to come will lead to the erosion of the investment climate," he said.

ALSO SEE Government under pressure to roll back fuel price hike

The Prime Minister was asked about growing concerns over the recent hike in oil prices and the ripple that may have.

The Prime Minister said populist fiscal policies would also lead to the erosion of the capacity to create new jobs which in turn will erode the government's ability to invest in flagship programmes for the poor people.

ALSO SEE UPA allies fume over fuel price rise

"So we have to balance these factors. The increase in the fuel prices, the direct effect on the Wholesale Price Index will be no more than 0.40 per cent," he said.

He said there may be some escalation but "my hope now is that with the rabi crop coming into the market, prices which have caused a great degree of concerns in areas like wheat, sugar, oilseeds and pulses, will see some moderation".

ALSO SEE Budget: a mixed bag with tax sops, fuel price hike

He expressed confidence that the economy has the capacity to absorb the hike in oil prices without setting in motion any inflationary spiral.

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