Indian Prime Minister Manmohan Singh's address to the nation - Full speech (September 21, 2012)

- I am speaking to you tonight to explain the reasons for some important economic policy decisions the government has recently taken. Some political parties have opposed them. You have a right to know the truth about why we have taken these decisions.

No government likes to impose burdens on the common man. Our Government has been voted to office twice to protect the interests of the aam admi.

At the same time, it is the responsibility of the government to defend the national interest, and protect the long term future of our people. This means that we must ensure that the economy grows rapidly, and that this generates enough productive jobs for the youth of our country. Rapid growth is also necessary to raise the revenues we need to finance our programmes in education, health care, housing and rural employment.

The challenge is that we have to do this at a time when the world economy is experiencing great difficulty. The United States and Europe are struggling to deal with an economic slowdown and financial crisis. Even China is slowing down.

We too have been affected, though I believe we have been able to limit the effect of the global crisis.

We are at a point where we can reverse the slowdown in our growth. We need a revival in investor confidence domestically and globally. The decisions we have taken recently are necessary for this purpose.

Let me begin with the rise in diesel prices and the cap on LPG cylinders.

We import almost 80% of our oil, and oil prices in the world market have increased sharply in the past four years. We did not pass on most of this price rise to you, so that we could protect you from hardship to the maximum extent possible.

As a result, the subsidy on petroleum products has grown enormously. It was Rs. 1 lakh 40 thousand crores last year. If we had not acted, it would have been over Rs. 200,000 crores this year.

Where would the money for this have come from? Money does not grow on trees. If we had not acted, it would have meant a higher fiscal deficit, that is, an unsustainable increase in government expenditure vis-a-vis government income. If unchecked, this would lead to a further steep rise in prices and a loss of confidence in our economy. The prices of essential commodities would rise faster. Both domestic as well as foreign investors would be reluctant to invest in our economy. Interest rates would rise. Our companies would not be able to borrow abroad. Unemployment would increase.

The last time we faced this problem was in 1991. Nobody was willing to lend us even small amounts of money then. We came out of that crisis by taking strong, resolute steps. You can see the positive results of those steps. We are not in that situation today, but we must act before people lose confidence in our economy.

I know what happened in 1991 and I would be failing in my duty as Prime Minister of this great country if I did not take strong preventive action.

The world is not kind to those who do not tackle their own problems. Many European countries are in this position today. They cannot pay their bills and are looking to others for help. They are having to cut wages or pensions to satisfy potential lenders.

I am determined to see that India will not be pushed into that situation. But I can succeed only if I can persuade you to understand why we had to act.

We raised the price of diesel by just Rs. 5 per litre instead of the Rs. 17 that was needed to cut all losses on diesel. Much of diesel is used by big cars and SUVs owned by the rich and by factories and businesses. Should government run large fiscal deficits to subsidise them?

We reduced taxes on petrol by Rs. 5 per litre to prevent a rise in petrol prices. We did this so that the crores of middle class people who drive scooters and motorcycles are not hit further.

On LPG, we put a cap of 6 subsidised cylinders per year. Almost half of our people, who need our help the most, actually use only 6 cylinders or less. We have ensured they are not affected. Others will still get 6 subsidised cylinders, but they must pay a higher price for more.

We did not touch the price of kerosene which is consumed by the poor.

You should know that even after the price increase, the prices of diesel and LPG in India are lower than those in Bangladesh, Nepal, Sri Lanka and Pakistan.

The total subsidy on petroleum products will still be Rs. 160 thousand crores. This is more than what we spend on Health and Education together. We held back from raising prices further because I hoped that oil prices would decline.

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