We witnessed the devastating impact of post-Covid lockdown on Indian economy. With the lifting of lockdowns, the citizens trying to get back on their feet are now hit by skyrocketing fuel prices. We witnessed the same situation a few years back as well but that is an altogether different story. Today the outrage is limited to few tweets, memes and rare write-ups here and there. So, I would confine myself to the probable impact of this scenario on our already bruised economy if it remains uninhibited.
If this everyday increase in fuel prices is able to impact headline inflation then not just the middle class but the poorest of the poor will feel the heat. Our Finance Minister calling this trend a vexatious issue and a Maha Bayankar Dharma Sankatam and our Prime Minister blaming the opposition will not help in such a crucial time. The same old rant every time there is a hike in fuel prices that it is influenced by international factors is not something people will buy this time. We all know that approximately two-thirds that is more than 61 per cent of the fuel prices constitute tax. Because of these taxes at the Centre and State levels being a significant part of pricing, consumers fail to get any benefits of decreasing oil prices in the international market. Like, for instance, due to Covid when price of crude plummeted, Indians saw a very meagre decline in fuel prices. Post-Covid Centre raised the excise duty twice. Right now, the government is only eyeing a surge in their own revenues which is a very short-sighted approach and can harm the economy immensely.
Right now our economy is in crucial need of hike in demand which is getting impacted by rising fuel prices as people have started cutting on their outlays as it is burdening their already burdened pockets. Currently, we Indians are paying one of the highest taxes on fuel in the world. This will also have a huge impact on the automobile sector and allied sectors related to it inducing higher unemployment rates. Public transports will see a hike in rates and businesses based on transportation and logistics will be impacted badly as freight costs will rise. All this can have a cascading impact on the major drivers of growth in our economy, forcing us to get trapped in the vicious cycle coming out of which will a very daunting task further delaying our recovery process. Biggest risk of all this will be an increase in overall inflation rates.
We can definitely ponder over reducing our import dependency as our Prime Minister suggested but this is not the moment to plan it out as it is a long term process. It demands a quick solution not just to save the middle class from the heat it is facing but also to protect the poor from upcoming inflationary trends. So there is a lot in the hands of the government right now only if they are willing to act prudently. Hope they act on what is in their hands and do not take the trust of the middle class in them for granted.
[The writer is Assistant Professor, Dept. of West Asian Studies, Aligarh Muslim University, Aligarh. [email protected]]