In early part of the spread of the COVID pandemic, India crude basket plunged from a high of USD 70 pb in early Jan-20 to USD 16 pb by end of Apr-20
Download ReportIndia excise duty on fuel - To cut or not to cut?
The record high fuel prices are bound to generate direct inflation as also second order inflationary impact by building into cost of logistics, besides weighing on inflation expectations. In this vein, it is not surprising that for households while near term inflation expectations have eased amidst correction in food prices, 1-year ahead expectations have remained unchanged at close to double-digits, as per RBI’s latest round. As such, scope for some rationalization in excise duties can be explored. But to be fair to the Government, the decision is not as straightforward. The Government must decide on a quantum of reduction in excise duty which has trivial fiscal but not so trivial inflation implications, while timing it to the dynamism of level of crude price, its likely trajectory and that of the domestic currency. Towards this, we offer some thoughts underpinned by our analysis.