GOING AWAY WITH PETROLEUM SUBSIDY



Momentary happiness at the cost of jeopardizing future is a parochial way of governing.  Especially, when the ephemeral bliss exacerbates the way forward so much so that it has catastrophic repercussions.  Despite meticulous planning the fiscal deficit last year stood at staggering 5.9% of GDP way above the estimated in the Union Budget 2011-2012.

Expenditure on oil and petroleum is soaring owing to the large industrialization and urbanization. Providing affordable fuel is the ultimate demand of the middleclass. So, subsidy, as an issue, has a potential to overrun the existing government; but there is need of cognizance among people of what this short term comfort doing to the economy in the long run. Subsidizing petroleum incurs government huge pay which instead would be paid by mostly not so affluent but still well to do thriving middle class. These people would continue to travel and buy cooking gas although with a bit of constrained consumerism, nevertheless, it is not a huge price to pay for what we are getting in return. The amount saved can be invested instead of spending on asset creation activities like infrastructure, education, healthcare and most importantly financial inclusion. Quixotic may sound, but the truth is these have a multiplier effect on the economic growth. Unemployment, poverty, malnutrition are the evils to be eliminated providing huge boost to growth.

A high fiscal deficit hampers the economic image in the global market. Rating agencies have a hawk eye on this index to acknowledge the investors and companies about the efficiency and the feasibility of the current market. No doubt, India, at present, is in dire need of foreign investment and given the global meltdown we are seen as a place to be given our hunger, need, capability to grow. Acting now in a way that enables us to see ourselves as a super power in the near future lies in our strength to implement a hard, bold and a decision like going away with subsidy.

Recent stance of government is quite aggressive, disheartening its key allies, it has showed that it is now or never. Opposition going by their name is busy in opposing anything which is kept on the table no matter how constructive or far sighted it may be. Given the credentials of our brass leaders, the decision to reduce the subsidy will culminate in regaining the lost momentum. Animal spirit will be unleashed.


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