The spike in crude prices to a two-year high of over $65 per barrel could have a bearing on the fiscal deficit at a time of uncertainty in tax collections after the GST.
The spike leaves little option for the government as it had cut the excise duty by Rs 2 per litre on petrol and diesel in October that is estimated to cause a revenue loss of Rs 13,000 crore in the last six months of the financial year.
If the government is compelled to slash the excise duty on petrol and diesel to check a fuel price rise, it could come under pressure on the fiscal deficit front.
“For a net oil importer like India, a sustained rise in crude oil price would have adverse macroeconomic implications,” Nomura said in a report. Read More