More decisions to boost growth likely to follow: Rangarajan

Referring to diesel price hike, he said the decision would help in reducing the fiscal deficit.

Updated: Oct 15, 2012, 20:50 PM IST

New Delhi: The government's recent decisions to raise diesel prices and allow FDI in multi-brand retail have boosted investor sentiments and more decisions to boost growth are likely to follow, said PMEAC Chairman C Rangarajan.

Rangarajan, in an interview to the Rajya Sabha TV, said the recent series of actions have "certainly" helped to reverse the adverse investment sentiment and has also acted as a stimulant for further accelerating the economic activity.

Referring to diesel price hike, he said the decision would help in reducing the fiscal deficit.

"Secondly, it (diesel price hike) is also clearly indicated that the government is prepared to take strong policy action even though or even if some of these actions are treated as being apolitical and unpopular...So it has sent out a message of that particular type which is what the investment community, business community and people in general were looking forward to," he said.

The government last month raised the diesel price by a steep Rs 5 per litre and capped the number of subsidised cooking gas cylinder to six per household a year.

Rangarajan further said that the recent decisions to expand the scope of FDI in some areas, like insurance and pension, will take time to fructify.

"Investment is not going to come in that quickly. Therefore, we will have wait for it and also as you know some of the decisions...You will also require legislative approval but what these decisions are clearly indicating is the determination on the part of the government to go ahead in right direction," he said.

On economic growth in 2012-13, the Prime Minister's Economic Advisory Council (PMEAC) Chief said: "I think it will may still be in the range of 6 to 6.5 percent, certainly 6 percent appears to be reachable, realisable..."

IMF forecasts India's GDP growth at 4.9 percent in 2012.

Rangarajan said that in short period the way to push the economy forward is to focus on those sectors which are in the public domain and for which public expenditure have already been allocated in budget.

On power and coal sectors, Rangarajan further said production can be augmented by "sheer focus" on these sectors.

He also exuded confidence that Finance Minister P Chidambaram through appropriate actions on the revenue and expenditure sides would be able to contain the fiscal deficit as close as possible to the budget level of 5.1 percent.

Referring to the monetary policy, he said the actual stance of the RBI will depend on the behaviour of inflation.

As per the latest data, inflation increased to 7.81 percent in September from 7.55 percent a month ago.

The Reserve Bank is scheduled to unveil its policy on October 30.