Indian Prime Minister Manmohan Singh said on Monday the government would maintain fiscal discipline but could not keep subsidising energy consumption at current levels.
"We will ensure that we maintain fiscal discipline and manage our resources with care. No government can spend its way to prosperity," he said at a function to mark two years of his Congress-party led coalition government.
Singh said his government had kept inflation in control despite soaring crude oil prices.
"It must be recognised that despite the enormous pressure of high international oil prices, we have moderated its inflationary impact. However, we cannot continue to subsidise energy consumption on this scale," he said.
India has not raised the state-administered prices of petrol and diesel since September because of strong pressure from the government's leftist allies.
Oil Minister Murli Deora said earlier on Monday the government would take a decision on increasing retail fuel prices by the end of this month. The oil ministry has estimated state energy firms would lose 750 billion rupees ($16.4 billion) in revenue in the fiscal year to March at current prices.
The combined deficit of the state and federal governments, which was almost 10 percent of gross domestic product in 2001/02, was 7.7 percent in the past fiscal year that ended on March 31, lower than the 8.4 percent in 2004/05.
The economy has grown an average 8 percent a year in the past three years on strong demand and the central bank expects growth of 7.5-8.0 percent in the fiscal year ending March, 2007.
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