PM rules out rollback of fuel price hike

But with food prices rising at an annual rate of nearly 20 per cent,UPA allies Trinamool Congress and the DMK party,have said higher fuel prices will further hurt the poor.

“Any increase in prices does hurt some people,but we have to take a long-term view,” Singh told reporters on his way back to India from a visit to Saudi Arabia.

The government sets retail prices of petrol,diesel,cooking gas and kerosene to help control inflation and protect consumers,particularly the poor,from sharp fluctuations in energy prices.

But it is now considering abandoning control of fuel prices,which require huge state subsidies,in order to cut the fiscal deficit to an estimated 5.5 per cent of GDP in 2010/11 from 6.9 per cent.

The economy,which is forecast to grow at 7.2 per cent in the year to March 2011,has the capacity to absorb the increase in fuel prices without putting much additional pressure on inflation,the PM said on Monday.

“The increase in fuel prices,the direct effect on Wholesale Price Index will be no more than 0.40 per cent,” he said.

High food prices helped push wholesale price inflation to 8.56 per cent in January.

“My hope now is that with the Rabi (winter sown) crop coming into the market,prices which have caused a great degree of concern in areas like wheat,sugar,oilseeds and pulses,will see some moderation,” Singh was quoted as saying.

Following populist policies indefinitely,Singh said,would harm the economy in the long run,eroding the investment climate and the capacity to create new jobs as well as the government’s ability to invest in welfare schemes,Singh said.

“So we have to balance these factors,” PM said.