Prime Minister's Economic Advisory Council (PMEAC) Chairman and retired Reserve Bank of India Governor C. Rangarajan said on Friday in Hyderabad that the increase in diesel price might push up inflation in the short run, reports said.
However, the Indian government move is expected to help contain fiscal deficit, leading to gains in the long run, he said.
He also sought to allay apprehensions over the government move to allow FDI in multi-brand retail, saying that kirana stores can become part of modern retail by organizing themselves and getting assimilated into the organized sector.
Rangarajan said "the immediate impact of increase in any administered price like this would push the price index up. But we need to look at from long term point of view."
The government recently increased the price of diesel by Rs.5 a litre and capped the use of subsidized LPG cylinder to six in a year per family, evoking sharp protests all over the country.
He said, "Immediately, it can produce raise in the price index but over the year I think over the medium term it is the best thing to do."
On the government decision to allow FDI into multi-brand retail, he said it would create an opportunity to improve infrastructural facilities in the agricultural marketing field which may ultimately lead to price reduction.
by RTT Staff Writer
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