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Business News/ Politics / Policy/  Govt to streamline subsidies, cheap LPG for rich may go: Jaitley
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Govt to streamline subsidies, cheap LPG for rich may go: Jaitley

Finance minister says some element of subsidy will have to remain for a large section, wants RBI to make cost of capital reasonable

Under the current dispensation, finance minister Arun Jaitley said the government targets a specific number for deficit and in turn borrows from the market to fund current expenditure. Photo: Pradeep Gaur/MintPremium
Under the current dispensation, finance minister Arun Jaitley said the government targets a specific number for deficit and in turn borrows from the market to fund current expenditure. Photo: Pradeep Gaur/Mint

New Delhi: A reduction of the scope of subsidies currently being provided to well-off people appears to be on the anvil with finance minister Arun Jaitley questioning the justification of “unquantified" subsidy amounts to “unidentifiable" sections.

However, he maintained that some element of subsidy will have to remain for a large section who are entitled to it since the country has lot of poor people who need state support.

“Yesterday I had said why should people like you and me get an LPG (Liquefied petroleum gas) subsidy and look at the kind of burden it is having on the budget. We have started living with the deficit budget. We just make sure that our fiscal deficit is not beyond a particular point," he said on Sunday at an interaction with PTI journalists at the agency’s headquarters here.

Some element of subsidy, he said, would always be required because there were lot of poor people who need support. “But then you cannot have such sections enjoying the benefit who are not entitled to," he added.

Under the current dispensation, the minister said the government targets a specific number for deficit and in turn borrows from the market to fund current expenditure.

“You cannot have a subsidy, an unquantified amount given to an unidentified section of people. So subsidy must be a quantified amount given to an identifiable section. It cannot be made for unidentifiable section of people," he said, adding duplication of subsidy benefits results in losses to the exchequer to the tune of “thousands of crores".

“We will leave the next generation in debt so that they (next generation) levy higher taxes to pay back the loan of subsidising me, when I am not entitled to the subsidy. So this kind of an economy will keep the country in a trap," he said.

Cheaper cost of capital

Jaitley pitched for an interest rate cut, expressing confidence that the Reserve Bank of India (RBI) will move in the direction of making the cost of capital reasonable to help perk up economy.

“The cost of the capital must be reasonable ... If you are unable to infuse liquidity or unable to provide capital which is cheaper then even if you have opened out (economy) that itself won’t be enough. So it is a chain of events which has to take place," he said.

RBI which has kept policy rates unchanged for almost 10 months citing high inflation despite persistent demand from industry and government for a cut to boost economic activity, is slated to review monetary policy on 2 December .

“...its their (RBI) job to balance rates with inflation. I am sure they will do it competently. But fact is this is the direction we have to take...we are slowly but surely moving in that direction," he said. “I am sure the RBI is run, headed by eminent and competent people. They also see merit," he said.

Inflation based on the wholesale price index cooled to a 5-year low of 1.77% in October driven by softening prices of fuel and food items. At the same time, retail inflation, based on consumer price index, also eased to 5.52% at end of October. With moderation in inflation, there is a widespread expectation that RBI will cut interest rate in its upcoming bi-monthly monetary policy.

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Published: 23 Nov 2014, 01:04 PM IST
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