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Last updated: 18 Sep, 2018  

Petrol.9.thmb.jpg Rising fuel prices, falling Rupee

Petrol.9.jpg
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Bikky Khosla | 18 Sep, 2018

Of late, there has been a growing concern about fundamental of the economy. Fuel prices are going up and the Rupee's value is tumbling down, both like never before, thereby dominating headlines across the country. Last week, Opposition parties even called for a nation-wide strike to protest against high fuel prices. Meanwhile, the Centre, in order to contain the widening CAD and check the rupee fall, came with an array of measures, but the results are not yet evident. This situation definitely requires urgent attention.

The steps announced by the Centre last week to contain Rupee depreciation include removal of withholding tax on Masala bonds, curbs on non-essential imports and relaxation for Foreign Portfolio Investors. As a result of the announcement, the currency initially showed some sign of recovery but to crash again soon. Experts point out that these measures are neither effective nor appropriate at this stage, amid fund outflow, escalation in global trade protectionism and high crude prices in the international market.

Meanwhile, domestic fuel prices pose no less a challenge to the government. Today, one litre of petrol costs Rs 82.16 in New Delhi and Rs 89.54 in Mumbai while diesel prices stand at Rs 73.87/litre and Rs 78.42/litre respectively in these two cities. Naturally, there has been a popular anger over such high prices, which last week promoted the Modi government -- which had been so far resisting the populist trend of cutting fuel prices -- to say that it would soon come up with an action plan to rein in fuel prices.

Ballooning current account deficit, which stood at 2.4 percent of the GDP in the first quarter, is another challenge that Centre must require to address. The Finance Minister recently said the government would stick to its capital expenditure targets to achieve high growth and maintain the budgeted 3.3 percent fiscal deficit target in the current year. He, however, parried reporters' questions on the issue of petroleum prices. It seems the government is still working on finding out a balanced approach.

I invite your opinions.

 
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