Dr C. Rangarajan, Chairman of Economic Council to the Prime Minister, said it is not possible or desirable to increase diesel prices at one go to adjust with international prices.

“Since prices of diesel have not been adjusted for long time, the required adjustment to bring on par with international prices is very high. One has to do it (increase) in phases,” he said.

Talking to reporters on the sidelines of ITsAP (IT, ITES industry association of AP) here on Monday, he said food inflation seemed to be on the rise though overall inflation was coming down.

“Non-food inflation has shown a definite sign of decline. Food inflation is result of a number of factors. Vegetable prices seem to be on the rise again,” he said.

Asked about policy decisions on 2G could impact foreign direct investments (FDI) into India, he said flow of FDIs depended on future growth prospects of economy. “If we continue to maintain 7.5 per cent growth rates for next several years, I don't see any decline in FDI,” he said.

On additional income to sugarcane farmers, he said a committee was appointed just a month ago. “The idea is that sugarcane growers should get additional income besides MSP (minimum support price) in the form of a share in profits,” he said.

This had been a practice in some countries. Details were yet to be worked out. “It will take about five months (to come out with proposals),” the former RBI Governor, said.

Sops for IT industry

Earlier addressing the ITsAP gathering, he said tax concessions cannot be permanently given. Responding to the pleas of ITsAP officials he, however, said the Government would take another look on this issue.

“The IT industry needs to move towards high value products. Product innovation has not been received that much attention so far,” he said.

He said IT had helped banks to reduce intermediation costs to 1.17 per cent in 2010-11 from 2.59 per cent in 1991-92. The cost-income ratio had declined, while business per branch had increase several fold. kurmanath@thehindu.co.in

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