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PM panel wants diesel prices and tax hiked; subsidies cut

New Delhi: India is likely to clock a GDP growth of 7.5 to 8 percent in 2012-13, Prime Minister's economic advisory panel said today and asked the government to increase indirect tax rates and raise fuel prices to improve finances.

The economy will expand by 7.1 percent in the current fiscal on the back of good output in farm and construction sector, Prime Minister's economic advisory council Chairman C Rangarajan said releasing the Review of Economy (2011-12).

This is a shade higher than the 6.9 percent GDP growth projection made by the Central Statistical Organisation (CSO).

He said clocking a 9 percent growth in the near term would be challenging on account of uncertain global econom. Reuters

"We might be able to achieve a growth rate close to 8 percent on our own steam ... provided we take some of the corrective actions," Rangarajan told reporters here.

Inflation rate at 6.5 percent at March end will still be above "comfort" levels, he said projecting the rate of price rise to fall to 5 to 6 percent next fiscal.

He said clocking a 9 percent growth in the near term would be challenging on account of uncertain global economy.

Indian economy was growing at over nine percent before the financial meltdown of 2008 pulled down the growth rate to 6.7 percent in 2008-09.

Rangarajan said the government should aim at increasing tax revenues by about Rs 35,000 crore through an increase in excise and service tax rates to pre-crisis level, bringing back disinvestment on the table and containing subsidies to check its finances.

"It will be necessary during 2012-13 to make some adjustments on the diesel prices in a phased manner. We have not done this for quite some time and international crude prices have gone up ... It is not possible for us to subsidise this sector beyond a level," Rangarajan said.

Expressing concern over high fiscal deficit, which is expected to overshoot the target of 4.6 percent of GDP this fiscal, he said the government "must try" to contain and improve efficacy of subsidies.

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PTI