Economy, energy, ecology, livelihood and national security are the five challenges that will top the Government's policy agenda in 2012, the Prime Minister, Dr Manmohan Singh, said on Saturday.

In a New Year message to the nation, the Prime Minister said that a critical element in ensuring economic security and prosperity is the need for fiscal stability.

“I am concerned about fiscal stability in future because our fiscal deficit has worsened in the past three years. This is mainly because we took a conscious decision to allow a larger fiscal deficit in 2009-10 in order to tackle the global slowdown,” Dr Singh said.

He said it was the right policy at the time.

“But like other countries that resorted to this strategy, we have run out of space and must once again begin the process of fiscal consolidation,” he said.

Important step

The Prime Minister felt that the most important step for restoring fiscal stability in the medium term is the introduction of the Goods and Services Tax while another is the phased reduction in subsidies.

“Some subsidies, such as food, are justifiable on social grounds, but there are other subsidies that are not and these must be contained,” he said.

On energy security, Dr Singh said that both goals of expanding new investment and achieving energy efficiency require a more rational pricing policy.

The Prime Minister warned against becoming complacent about the economy's performance. It would be wrong to conclude that the country is now unshakeably set on the process of rapid growth, he said, adding, “Our growth potential is indeed established. But there are many challenges we have to face to maintain this growth in the years ahead.”

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