Household distress to delay recovery, slash fuel taxes now: SBI report

Fuel expenses crowding out consumption demand

India’s economic recovery could be delayed due to the rising financial stress on households, and with inflation adding to their woes, a State Bank of India (SBI) report has called for urgent cuts in fuel taxes arguing that high oil prices not only spur further inflation but are also forcing consumers to spend less on other items. While retail inflation moderated marginally from 6.3% in May to 6.26% in June, the SBI research note issued on Tuesday morning said this was driven by pan, tobacco and intoxicants, which eased to 4% from 10% in May, but food prices, especially protein sources like egg, milk, pulses and oils and fats, are still exhibiting an increase in prices. “Oil and fat inflation have risen to 34.8% in Jun’21 from 30.9% in May’21 thus showing that the government basic import duty cut on crude palm oil to 10% from 15% and refined palm oils to 37.5% from 45% is not having much impact,” SBI group chief economic advisor Soumya Kanti Ghosh pointed out.