In a note written by Soumya Kanti Ghosh, Chief Economic Advisor, SBI Group, it has been said that the government should cut tax on fuel. Let us tell you that at this time petrol has crossed Rs 100 per liter in most of the metros of the country. At the same time, the price of diesel has also reached close to scoring a century. However, in some parts of the country, diesel has crossed the Rs 100 mark. According to an estimate, Rs 40 per liter on fuel goes to the Center and the states as tax. Ghosh said that now consumers are being forced to reduce health expenditure due to spending more on fuel.
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‘Excess spending on fuel has an effect on inflation’
State Bank’s CEA Ghosh said, “Analysis of spending on SBI cards shows that non-discretionary health spending is being cut to meet the increase in fuel spending.” He said that the expenditure on other non-discretionary goods such as groceries and various utility services has come down. Ghosh cautioned that the high expenditure on fuel is having an impact on inflation. Inflation has remained above the Reserve Bank’s satisfactory level for the second consecutive month in June. He said a 10 per cent increase in fuel prices leads to a half per cent increase in the core consumer price index (CPI) based inflation.
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‘It is necessary to cut fuel prices by reducing taxes’
Ghosh has said in his note that there is an urgent need to cut fuel prices by harmonizing the tax. Otherwise, consumer spending on non-discretionary products will remain low. Meanwhile, Ghosh said that as per the estimates of Central Statistics Office (NSO) data, the headline inflation in May 2021 stood at 6.30 per cent. At that time, due to the epidemic, there was a local level lockdown in various parts of the country. As such, this figure appears unusual.
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