Date:09/06/2006 URL: http://www.thehindubusinessline.com/2006/06/09/stories/2006060904170900.htm

Back PM asks advisory council opinion on market crash

Our Bureau

Impact of petro product price hikes will be `very little', says Rangarajan

New Delhi , June 8

The Prime Minister, Dr Manmohan Singh, on Thursday expressed concern over the plummeting stock markets and took note of the situation at a meeting of the Prime Minister's Economic Advisory Council here today.

Speaking to presspersons after the meeting, the Chairman of the Council, Dr C. Rangarajan, said, "The trends in the stock market were discussed. The market is still a matter of concern. The Prime Minister took note of the situation and wanted to know from us what factors are leading to the present trends."

"The council was of the view that the bear hammering was the result of both global factors as well as domestic issues including petroleum price hike," Dr Rangarajan said and added that his feeling was that the stock market fall was bottoming out.

The stock market today recorded its steepest fall this month, with the Sensex shedding 461 points, taking the cumulative fall since Monday to 1,155 points.

On the issue of petrol and diesel price hikes, Dr Rangarajan said that the council's estimate is that the impact would be very little.

The direct impact of the hike in petroleum prices would be 0.4 per cent on the general price line and taking together the indirect multiplier effect the total impact would be less than 1 per cent, he said.

He also said that the advisory council is against any proposal of roll back in petro product prices.

Rate hike `no surprise'

On interest rates, the former RBI Governor said that rates have been hardening and Reserve Bank's move to increase repo and reverse repo rates was reflective of the changed scenario and has not come as a surprise.

The Economic Advisory Council also pushed for the pending reforms, particularly the various Bills pending in the Parliament like the Pension Bill, Competition Bill among others.

Dr Ranjarajan also said that substantial discussions took place on agriculture. "If agriculture grows by 4 per cent then a growth rate anywhere above 8 per cent is achievable. If agriculture grows by 2 per cent also reaching 8 per cent is possible," he said.

The council also deliberated upon the institutional credit system for marginal and sub-marginal farmers and discussed modalities of linking with other extension services given to the farmers.