If fuel prices are not controlled, the economy will suffer

When fuel prices rise sharply, the balance between the income and expenditure of the common man goes for a toss. Prices of petrol and diesel rose for the seventh day in a row. With the sharp rise in the price of LPG cylinders for home use, the life of the common man has become unbearable.

The price of a domestic LPG cylinder was hiked by Rs 50 recently, and 175 per cylinder during the last three months. With the government suspending the subsidised supply of LPG cylinders for domestic use in the name of COVID-19, the cost of cooking a meal has skyrocketed.

The sharp rise in crude oil prices is one of the reasons for the country’s continuing rise in fuel prices. In the last one month alone, the international price of crude oil has risen by about 15 per cent. Brent crude is currently trading at $ 63.25 a barrel, up from $ 55 a barrel on January 15.

This increase is reflected in the price of petrol and diesel in India. VAT and excise duty are 63 per cent of the price of petrol. The tax on diesel is 40 percent. The sharp rise in taxes along with the rise in prices is one of the reasons why the pockets of the common man are being drained during the COVID period. Neither the central nor the state governments are ready to make any tax concessions.

Rising crude oil prices are hurting India’s economy. Crude oil prices are currently soaring above $ 60 a barrel, which is a major setback for India, which imports about a third of its crude oil. The additional cost of oil is detrimental to the economy as a whole. Rising transportation costs for goods and services are leading to inflation. As the stock market is a mirror of the economy, there will also be a detrimental effect on the rise in crude oil prices. This is not happening now because the global economy is showing signs of improving.

The government needs to realise that if measures are not taken to contain inflation, it will adversely affect the economy that is preparing for a rebound. Rising inflation could also lead to higher interest rates. If inflation rises sharply, the Reserve Bank of India will be forced to cut interest rates. With that, the favourable climate for improving the economic climate will change.