New Delhi:
Prime Minister Manmohan Singh on Saturday said normal rains expected this year will help cool food prices and in turn ease inflation to six per cent by December from over 10 per cent now.
The prevailing over 12 per cent food inflation and the recent hike in prices of petrol and diesel had generated quite a political storm that is expected to hit the monsoon session of Parliament beginning Monday.
"We expect to see the rate of inflation in wholesale prices to come down to around 6 per cent by December", he said here while addressing the National Development Council (NDC), the highest policy making body comprising Chief Ministers and the Planning Commission.
Singh regretted that states were not paying due attention to farm sector -- crucial to curbing inflation.
"This must be corrected if we want to achieve a broad based improvement in living standards in rural areas. Better agriculture performance is crucial for food security and would help in tackling the problem of inflation... present high rate of inflation is mainly due to food price inflation," he said.
However, Chief Ministers of BJP-ruled states said that it was the Centre that had failed in tackling inflation and that rising prices was making life difficult for the common man.
"Inflation poses a great threat to the country's development. In fact, there is a real danger that inflation, if not effectively tackled, could derail the entire growth process...," Gujarat Chief Minister Narendra Modi warned.
"There is a need to understand the constant agony that millions of people are forced to undergo daily," he said.
Singh, however, hoped that with normal monsoon expected, food prices would ease in the second half of the year.
Monsoon accounts for around 80 per cent of rains India receives and nearly 60 per cent of the cultivated land is rain fed. Two years of poor rains led to an upward spiral in food prices, the effect of which spread to manufactured goods.
Singh also sought support of the Chief Ministers for implementation of the Goods and Services Tax (GST) tax regime considered as the biggest tax reform that would combine central and states taxes.
"I would urge Chief Ministers to give full support to the effort to implement GST from April 1, 2011", he said.
The GST would replace excise and service tax at the central level and VAT at the state-level. The Centre has proposed a three rate structure - 20 per cent for goods, 16 per cent for services and 12 per cent for essential items.
On growth, Singh said though the economy would expand by 8.1 per cent annually during the Eleventh Plan period (2007-12), it would still be the highest-ever achieved any Plan.
The NDC was called to approve the Mid-Term Appraisal of the Eleventh Plan, which listed power and infrastructure as areas of concern to attaining 9 to 10 per cent economic growth.
India's economic growth slowed during 2008-09 to 6.7 per cent from over nine per cent since 2005-06 due to the global financial crisis. However, stimulus packages to boost demand pushed it up to 7.4 per cent last fiscal. It is expected to be 8.5 per cent this fiscal.
Despite India achieving high growth rate, the development schemes, the Prime Minister regretted, were not working well in backward areas, especially those hit by left wing extremism or Naxal violence.
"We must make a concerted effort to bridge the development deficit in these backward areas and reduce whatever sense of alienation that may exist among the adivasis living in these areas", Singh added.
The Prime Minister further stressed that failure to implement laws like Forest Rights Act and PESA (Panchayat Raj-Extension to Scheduled Areas Act) "reduces credibility of our commitment to bring development to these areas."
The Planning Commission, he added, will design a holistic development plan for Naxal-hit areas in consultation with the states and other stakeholders.
The Prime Minister also made a case for improving terms and conditions of the Public Private Partnership (PPP) projects for expediting development of infrastructure sector.
"We ... need to improve terms and conditions on which PPP projects are awarded to ensure that the process is transparent, bidding is competitive and public interest is adequately safeguarded", Singh said.
The Prime Minister also made a case for reducing the government's subsidy bill and curbing transmission and distribution losses which were estimated at Rs 40,000 crore during 2009-10.
Noting the plan outlay was dependent too much on debt, Singh said, there was a need to reduce public sector losses and scale down untargetted subsidies.
The Unique Identification Number scheme and information technology techniques, the Prime Minister said, should be used to "target subsidies effectively to those who really need them."
Regarding the power sector, Singh said, the high level of losses were not sustainable and "unless corrected, it will make the whole power sector unviable, since investment in generation and transmission depends upon the ability of the distributing companies to pay."
Singh asked the Chief Ministers to give personal attention to the problem of mounting losses in the power sector, pointing out that "corrective steps needed in this area lie entirely in the domain of the state governments."
The high losses in the power sector were attributed to low-levels of tariff charged from certain categories of consumers like farmers and technical problems relating to transmission of electricity.