Chief Economic Adviser (CEA) Krishnamurthy Subramanian hinted that the government is unlikely to cut fuel taxes, though petrol and diesel rates are a record high.
In conversation with Mint, he said, “When we look at it from the inflation perspective, what is the contribution (of petrol and diesel) to inflation is something we have to keep in mind. So we should speak based on data on all these aspects.”
Subramanian said food inflation is a bigger concern. He said that reducing fuel taxes may not have a significant impact on retail inflation, since the weightage in the index is low.
“If you look at the last 6-7 years, anywhere between 35-60 percent of contribution to retail inflation comes from food inflation,” he said as quoted by Mint.
“Weightage of petrol and diesel in CPI (Consumer Price Index) is less than 3 percent while weightage of food is about 50 percent. Even if you consider second-round effects (of the fuel price hike), the weightage is about 5 percent. So if you do an analysis, it becomes very clear that the contribution is not that large.”
Subramanian also said rising crude oil prices is reflecting in overall inflation.
In June, CPI-based inflation rose 6.26 percent, slightly lower than 6.30 percent in May.
Food inflation rose slightly to 5.15 percent in June, while inflation in the ‘fuel and light’ sub-group increased to 12.7 percent.
Petrol price on Tuesday, July 13 remained unchanged after reaching record high on Monday across the country.
Meanwhile,the price of Diesel also remained steady after a slight decrease in its price was observed on the previous day.In the national capital, the retail price of Petrol is Rs 101.19 per litre while the retail price of Diesel for one litre is Rs 89.72.
On Monday, the fuel prices were revised for the 39th time since May 4, taking the petrol price in Delhi above Rs 101 per litre-mark.
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