The government may not be able to continue passing on the rise in global crude prices to consumers for long without pushing up the consumer price index (CPI) inflation, say economists. Aditi Nayar, principal economist at credit rating agency Icra, told DNA Money that if the international crude prices head northward, and with India being a net importer of petroleum and petroleum products, the government would have to “counterbalance” between fiscal deficit risk and inflation risks.
“You are counterbalancing fiscal risk and inflation risk. If crude oil price rises, you will have either a fiscal hit or it could affect inflation. You can’t really protect both,” she said.
The government has till now resisted from cutting excise duty to reduce the impact of global crude prices on domestic petrol and diesel prices.
On Monday, petrol price touched a three-year high at Rs 74.50 per litre and diesel was at its highest level at Rs 65.75 per litre. Read More