Thursday 28 October 2021
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Government Must Reduce Fuel Tax

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The announcement by the union government of clearance of the dearness allowance arrears must have brought cheers to the households of government employees, but they form a minuscule part of the working class. As the southwest monsoon covered the entire country five days after the expected date, it impacted sowing by farmers in the kharif season. Last week, the annual comparison showing a reduction of 5.8 million hectares, or 10.4%, in the area sown was worrisome. Hoping this may eventually not affect the farm and food prices after some months, the reforms in the agriculture sector — objected to acrimoniously by a section of rich and pampered cultivators from Punjab, Haryana and western Uttar Pradesh — should be exploited to the hilt, making use of the best prices available nationwide to any seller interested, not impacting the budget of end-users.

Consumers of the middle class, meanwhile, have been concerned about the inflation that has been rising for two years after the CPI averaged 5.9% in 2014-15 and then trended downwards for four years, going down remarkably to 3.4% in 2018-19. It is but higher now with an average of 4.8% in 2019-20 and 6.2% last year. Over the last six months, there has been a steady increase in the food prices. It is intriguing why core inflation is still hovering around 6% despite weak aggregate demand. It is thus not just the high inflation that is disconcerting and weak growth.

The RBI has assured the people, of course, saying that the current trend, driven by disruptions across the world due to the Covid-19 pandemic, is temporary. In this scenario, if the central bank continues to prioritise economic growth by keeping interest rates low, the union government, as well as the state counterparts, can ease the situation by reducing the tax component of each on fuel prices. If the crude oil prices are on the rise, the nation-state must remember there was a time when they were plummeting but the government chose to divert the savings to highway construction rather than benefit petroleum products’ users. When fuel prices not leaving much scope for discretionary consumption, as the SBI has noted, with credit card spending pattern showing that the expenditure on oil has cut into spending on grocery items, the salaried class, which is hoodwinked into believing the government cares for it through some tinkering of income tax slabs, must raise a din to move the government.

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