We have to bite the bullet to bring subsidies down

Prime Minister Manmohan Singh spoke to Doordarshan on Mukherjees call to control subsidies.

Prime Minister Manmohan Singh spoke to Doordarshan on Mukherjees call to control subsidies. Edited excerpts

What do you think there is in the budget that promises to help,shall we say,with inflation?

The biggest thing that fiscal policy can do in controlling inflation is by controlling the fiscal deficit. Fiscal deficit in the current year has turned out to be as high as 5.9 per cent. The Finance Minister has promised to bring it down to 5.1 per cent of GDP. If that happens,that would be a material contribution to stabilising the price level; also reducing the extent of crowding-out that invariably follows if government borrowing goes haywire.

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One reason why fiscal deficit went out of control was that global prices of fuel and fertiliser increased. Apparently the subsidy bill will come down from 2.4 per cent of the GDP to 1.9. How is this to be done?

The Finance Minister has pointed to the need to control subsidies. He has also said that he would bring the subsidies to less than 1.7 per cent of the GDP in the next three years. Now,that is obviously a task which would,I think,require the government to put forward an effective programme for adjusting the prices of petroleum products,and adjusting other relevant prices. So,we have to bite the bullet. There is no other way in which you can reduce subsidies.

That is a very courageous statement. Mamata Banerjee seemed to be very worried about any rise in the prices of these commodities. Is she on board?

I think these are compulsions of managing a coalition. There will be difficulties. There have been difficulties. But ultimately,if the government is to govern,it must have a sustainable strategy for managing the economy. I sincerely hope when the time comes to take relevant important decisions which are tough,we will consult all our allies and take them on board.

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There is a proposal for extending Aadhar. Is it settled that Aadhar is to be the main platform on which the budget is to distribute benefits to the people?

I think the Finance Minister has made that quite clear. That the report of the Aadhar Committee,bringing 40 crore additional numbers,that has been accepted. And therefore,I think,there may be controversies,there are controversies in this sort of thing all over the world. But we have I think begun well,and we will use modern technological devices to cut out wastage and leakages in the delivery mechanism for various public-sector services.