Widespread opposition notwithstanding, Prime Minister's Economic Advisory Council chairman C. Rangarajan has strongly favoured an immediate increase in prices of diesel and cooking gas to contain government expenditure.

"It (increase in prices of diesel and LPG) should be done as early as possible. We need to take action.... howsoever unpleasant it may be," he said in an interview to Karan Thapar's 'Devil's Advocate' programme on CNN-IBN.

Hiking the prices of diesel and cooking gas, Rangarajan said, was necessary to cap subsidies and contain fiscal deficit at 5.1 per cent of the GDP during 2012-13.

The fiscal deficit was 5.76 per cent in 2011-12. "There is a need to raise the prices because the fiscal deficit can be contained only if we act on cutting subsidies and the most important element in subsidies is the petroleum subsidy. Therefore, there is a need for action with respect to the prices of diesel and LPG," he said.

While petrol prices were freed in 2010, government continues to fix the retail price of diesel, LPG and kerosene. The oil subsidy is estimated to cost the exchequer over Rs 60,000 crore in the current fiscal.

Although the government has taken an in-principle decision to deregulate price of diesel, it could not implement the same because of opposition from political parties, especially BJP.

Rangarajan also favoured giving a push to reforms in multi-brand retail, pension and insurance and other sectors to promote growth.

"We need to push it (reforms) further. If we had grown at 9 per cent during the earlier regime, we should be able to grow even now. But certainly, reform is a continuing process and we need to take action in various fields, such as banking, insurance, pension and get the consent of the people to these reforms," he said.

Rangarajan further said the government should take action to open foreign investment in multi-brand retail and work towards building consensus for its early implementation.

The government has not been able to open the retail sector to FDI because of opposition from various quarters including UPA allies.

Political opposition has also held up key reforms in sectors like insurance, banking and pension.

As regards economic growth, he said 6.5 per cent in 2011-12 'is a steep climb down' from the 9 per cent growth that we have seen in the last three years after 2005-06. This is also a climb down from 6.9 per cent growth rate which was estimated earlier'.

For he current fiscal, he expects the growth rate to be in the range of 6.5-7 per cent, lower than the government's estimate of 7.6 per cent.

"At the moment 7.6 per cent looks very ambitious. At this particular point, it does look difficult to achieve... But certainly 7 per cent I will not rule out," Rangarajan said.

On price rise, Rangarajan said high levels of inflation are not conducive for growth. He wanted the RBI to take steps to contain inflation saying the primary objective of the central bank should be to check price rise.

The WPI inflation was 7.23 per cent in April, while the retail inflation was 10.36 per cent.

The RBI is expected to take steps to deal with the problem of declining growth and rising inflation in its mid-quarterly monetary policy review on June 18.