Tax hike necessary to reduce fiscal deficit: Mukherjee

Kolkata, July 10 (ANI): Defending the central government's decision to hike tax rates, Finance Minister Pranab Mukherjee said the move is aimed at reducing a widening fiscal deficit.

Addressing media persons here on Friday, Mukherjee said the distribution of money allocated for developmental activities by the central government to states was not being properly utilised or channelled.

"The central government allots huge money for the states but at the end of the fiscal year, it is often noted that money is not used properly. Any Finance Minister would like to see the proper utilisation of money that he allots. There is no logic of saving money to reduce the fiscal deficit. To reduce the fiscal deficit, the taxes should be increased," he added.

Mukherjee further said the central government is doing its level best to propel developmental schemes despite global inflationary trends.

"A good financial policy aims at reducing the misuse of money flowing in an economy. However, there is no point in saving money for carrying out development activities.

Otherwise, it affects the government rather than helping it," added Mukherjee.

High food prices have posed a challenge to Prime Minister Manmohan Singh and triggered public protests.

In such a scenario, much depends on encouraging results on the agricultural front.

Fuel price rises are expected to push up monthly price inflation by 0.9 percentage points, government officials have said, exacerbating headline inflation that stood at a surprisingly high 10.16 percent in May.

Earlier, data showed the food price index rose 12.92 percent in the year to June 19, lower than the previous week's annual rise of 16.90 percent. The fuel price index climbed 12.90 percent compared with last week's annual rise of 13.18 percent. (ANI)