High fuel prices force people to cut costs on health services:
New Delhi: High fuel prices have been a major concern over the past few months, so much so that they now cost the average consumer, according to a report by the State Bank of India (SBI).
The report notes that rising fuel and diesel prices have forced people to spend less on non-food items such as food, health care, and services, thus reducing their demand.
Petrol exceeds Rs 100 to 100 percent in the regional and union unions (UTs), and diesel sells more than Rs 100 a liter in Rajasthan and Odisha. As a result, fuel consumption has risen to 75 percent in June from 62 percent in March.
Impact on inflation
The report warned that excessive fuel consumption could harm numbers. Inflation based on the consumer price index (CPI) for June entered by 6.26 percent, thus violating the upper limit of the Reserve Bank of India (RBI) band for the second straight month. CPI inflation was moderated slightly in June from 6.3 percent in May, while basic inflation also declined slightly to 6.16 percent from 6.4 percent in May.
According to SBI statistics, with a 10 percent increase in petrol prices (in Mumbai), there is an increase of 50 base points (bps) in CPI.
Depreciation of family savings
The report further notes that although inflation has shown a slight decline, rates have been raised and led to a fall in savings, thus adding to domestic challenges. According to SBI estimates, during the second wave period (March-June), the number of regions with deposit outflows is almost double that of the first waves. Full details of ASCB deposits show that during Q1FY22 (until June 18), deposits decreased by 38 percent, compared to the growth observed during Q1FY21.
This clearly shows the rise in domestic pressure.
The need for tax balances The increase in the impact of fuel prices has led to the demand for urgent reductions in oil prices by tax rates. On average, more than Rs 40 per liter is tax and government levy on institutions and provinces. If taxes are not fixed, then spending on non-consumer preferences will continue to be distorted and reduce the cost of choice, the SBI said. This will also exacerbate high bias in inflation.
International oil prices
As global fuel prices rose by $ 6 per barrel between May and June, the report said the vision for the future depended on product growth by Opec +. Declining oil prices overseas from low levels hit in May after a demand hit has sent off record high petrol and diesel prices in India. Alternatively, taxes have been increased when global pollution prices have dropped but can be reversed even though crude prices have risen. Reduced production by Opec and its partners has led to a reduction in supply and rising oil prices. India, which imports 85 percent of its oil demand, has long pressured the producer company to end its production cuts and allow oil prices to reach the right levels. But to no avail.
India and Opec
India is the third-largest consumer in the world of crude and Opec nations such as Saudi Arabia, which has traditionally been the main source of oil. However, Opec and Opec + ignored its call for a reduction in the supply chain, leading to India finding new sources to increase its crude oil exports. As a conclusion, Opec’s share in India’s oil exports dropped to 60 percent in May from 74 percent last month. The two sides have little ties, with Saudi Arabia and the UAE providing essential medicines, oxygen, and equipment to help India fight its second wave of coronavirus infection.
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