Indian Gov Is Going After Inflation; Here’s How

Photo by olieman.eth on Unsplash

The weekend brought some good news for the nation. The Indian government, on Saturday, announced a series of changes to the tax structure levied on crucial commodities in a bid to insulate consumers from rising prices amid high inflation.

Commodities Impacted

It was about time that fuel prices got stable. Finance Minister Nirmala Sitharaman announced that excise duty on petrol would be cut by Rs.8 per litre and Rs. 6 per litre on diesel.

Import duty on anthracite, PCI coal, and coking coal have been removed to slash raw material costs for local market demand.

A fresh subsidy of Rs.200 per cooking gas cylinder intended for over 90 million women beneficiaries below the poverty line will also be offered. 

The latest measures have already taken effect from May 22.

In the pipeline

Another 500 billion rupees are required to subsidise fertilisers, from the current estimate of 2.15 trillion rupees. Plans to cut down taxes on raw materials for plastic products are also underway.

For the Investors’ Ears

The government may need to borrow an additional 2 trillion rupees ($26 billion) in the current fiscal year from the market to fund these measures. This could lead to a stumble from its deficit target of 6.4% of GDP for 2022-23.

A sharp jump in inflation meant escalated input costs for businesses which prompted the central bank to shoot up interest rates.

Political Intentions

The rising prices and multi-year high inflation pose a major headache for PM Modi’s government ahead of elections. State governments have been asked to follow similar reductions in fuel prices aligned with federal plans.

Too long? Here’s a one-liner: Fuel rates cut, subsidy on gas cylinders and other taxes to trim as Centre steps up to curb inflation.

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