India May Consider Fuel, Maize Tax Cuts to Cool Inflation

In response to the central bank’s recommendations to assist in containing rising retail inflation, the Indian government may think about lowering levies on some commodities including maize and fuel. A choice won’t be made, though, until February’s inflation figures are made public. According to figures released this week, India’s annual rate of retail inflation increased to 6.52% in January from 5.72% in December.

Food inflation is expected to remain high, and current prices for milk, corn, and soy oil are raising concerns about inflation. The administration is considering lowering import taxes on goods like maize, which carries a 60% basic charge, and it may even lower fuel taxes once more.

Although the price of crude oil has decreased and stabilised globally in recent months, the lower import costs have not been passed on to customers or businesses striving to recover from losses. More than two thirds of India’s oil needs are imported. A tax cut by the federal government would encourage gas station operators to pass along the savings to retail customers, which would assist lower inflation.

Retail inflation in January exceeded the RBI’s upper target limit of 6% for the first time since October and was significantly higher than the 5.9% prediction in a Reuters poll of 44 analysts. This has been one method the government and RBI have used to coordinate in order to establish a macroeconomic climate that is stable. Among the obligations are fuel and corn. Before deciding on these, officials are awaiting at least one more print.

It would be reasonable to assume that if inflation stays above the 6% threshold in the coming few months, another rate hike may be contemplated, according to Bank of Baroda Chief Economist Madan Sabnavis, who believes that this data continues to support the RBI’s decision and stance. He further stated that there was little chance of a hike.

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