PM concerned at stock market fall; no roll back of fuel prices

New Delhi, June 8 (UNI) Prime Minister Manmohan Singh today expressed ''deep concern'' at the plummeting stock markets, as his Economic Advisory Council (EAC) favoured a no roll-back on hike in prices of petrol and diesel while maintaining that the issue should not be politicised.

The EAC felt that the prospects of growth in the current fiscal were bright and GDP growth in 2006-07 could be in the region of 7 to 8 per cent.

The EAC, which met at the residence of the Prime Minister at 7, Race Course, was of the view that the direct impact of petrol and diesel price hike would be 0.4 on the inflation index, while the total impact (direct and cascading) would be nearly one per cent.

Briefing newspersons on the outcome of the Council meeting, EAC Chairman C Rangarajan said the Prime Minister was fully committed to stepping up growth rate of agriculture and the Council looked at both institutional constraints and productivity issues relating to Indian agriculture.

The issue of high volatility of the bourses figured at the EAC meeting with the Prime Minister expressing concern at its steep fall, day after day, in the recernt past.

The EAC was of the view that this was a result of both global and domestic factors, the latter including the increase in petrol and diesel prices.

When pointed out that the stock markets had been falling even before the petrol price increase was announced, Dr Rangarajan said that at that point global factors predominated even more than domestic reasons.

He said that initially only FII's were net sellers, while the Mutual Funds were net buyers. But as the panic spread to the retail investors, the Mutual Funds were also compelled to sell.

This led to an all round selling pressure.

Dr Rangarajan said that the hike in Reverse Repo rate by 25 basis points today was a clear reflection of the hardening of interest rates, but added that the move was not entirely unexpected from the Central Bank.

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