The second half of the ongoing fiscal can possibly see lower prices and inflation levels coming down, a top government official has told News18 citing a host of international factors that have led to the present situation.
“There are predominantly international factors, which are involved in the present situation. The second half of the fiscal can see lower prices, it is possible. The global supply chain shortages, China’s lockdown creating its own set of problems and the Ukraine war — the sources of inflation here are generated by the global situation. You can mitigate, but not eliminate (inflation),” the top government official said, speaking on the condition of anonymity.
On Saturday, the Centre took the big step to reduce the central excise duty on petrol by Rs 8 per litre and on diesel by Rs 6 per litre, which will reduce the price further for consumers by Rs 9.5 and Rs 7 respectively. A subsidy of Rs 200 per gas cylinder to cover nine crore beneficiaries under the PM Ujjwala Yojana was also announced. These steps would cost the government Rs 1 lakh crore and Rs 6,100 crore respectively every year, Finance Minister Nirmala Sitharaman had announced.
“There are no easy answers to this (inflation). Each route to mitigate it has its own cost. This happens when you cannot control the supply of an item coming from outside. We are trying to mitigate the impact, which is true for any other country too. You can mitigate, not eliminate, there is no magic wand,” the top official quoted earlier said. “We don’t want the disposable income to be affected to the extent possible,” he added.
The official said the second half of the fiscal can see lower prices as the monetary policy action by developed countries could lead to lower economic activity, there will be stock market and asset market corrections, the Ukraine war impact could wear off and China’s lockdown and slowdown is another factor. This may mean relief for the common people in India from sometime after October when the festival season kicks in, as being speculated.
“If it is an inflation that is caused by excess economic activity, then it is easy to bring down by rising interest rates. But this is caused by something else. What the RBI is trying to do is to remove liquidity so that at least demand comes down on some things and people won’t hoard goods. Because if interest rates go up, cost of hoarding goes up. These are mitigation measures. Sometimes, high price becomes cure for the high price,” the official said.
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