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Business EYE JULY 23, 2021 | The Indian Eye 34

is the economy in crisis with rising fuel

prices and shooting inflation?

S&P Global Ratings on Tuesday affirms India’s sovereign rating at the lowest

investment grade of ‘BBB-’

Our Bureau of 4 (+-2) per cent. Consumer
price inflation has breached the
New Delhi upper limit of 6 per cent and is

he surge in fuel prices now, according to the NSO’s
is making people spend press release yesterday, 6.26 per
Tless on non-discretionary cent,” he said.
items like grocery, health and Meanwhile, S&P Global
utilities, economists at the coun- Ratings on Tuesday affirmed In-
try’s largest lender State Bank dia’s sovereign rating at the low-
of India (SBI) said on Tuesday. est investment grade of ‘BBB-’
The government should look for the 14th year in a row with a
at cutting taxes on oil, which is stable outlook, and said that the
keeping the prices of petrol and country’s strong external settings
diesel elevated, a note authored will act as a buffer against finan-
by group chief economic adviser cial strains despite elevated gov-
Soumya Kanti Ghosh said. The slow pace of vaccination in the country can cause big problems if a ernment funding needs over the
Petrol prices breached the third wave of pandemic hits India (ANI) next 24 months.
Rs 100 per litre mark across The sovereign credit ratings
the country, while diesel is also saying a 10 per cent increase in viewed. “We hold the Central on India reflect the economy’s
closing in on the three-figure prices leads to a 0.50 per cent government under the leader- above-average long-term real
mark per litre. As per estimates, jump in headline consumer price ship of Prime Minister Narendra GDP growth, sound external
over Rs 40 per litre goes as tax- inflation. Modi directly responsible for profile, and evolving monetary
es and excise to governments at The note said there is a need the high inflation. It is not being settings, S&P Global Ratings
the Centre and states. The taxes for an “urgent cut in oil through caused by rising demand, rather stated.
were increased when the global tax rationalization”, failing which the wrong policies of the govern- “India’s democratic institu-
crude prices had dropped but consumer spending on non-dis- ment and its inept management tions promote policy stability and
have not been rolled back even cretionary items will continue of the economy,” he said. compromise, and also underpin
as crude prices have rebounded. getting distorted and crowd out “Congress demands that the the ratings. These strengths are
“As consumers are spending discretionary expenses. central government immediately balanced against vulnerabilities
more on fuel, it is crowding out Meanwhile, Ghosh also won- reduce the prices of petrol, die- stemming from the country’s
expenses on health. Our analy- dered if the CSO data showing sel and LPG. We demand that low per capita income and weak
sis of SBI card spends indicates the headline inflation to be at import duties be reviewed and fiscal settings, including consis-
that spend on non-discretion- 6.30 per cent for May, at a time reset so prices of essential im- tently elevated general govern-
ary health expenditure has been of local lockdowns in many parts ported goods. We also demand ment deficits and indebtedness,”
substantially reduced to accom- of the country, was a “data aber- that GST rates be reduced on an it said in a statement.
modate increased expenditure ration”. array of goods,” Chidambaram S&P Global Ratings has fore-
on fuel,” Ghosh said. Inflation in the country is added. cast economic activity in India to
“In fact such spending has being caused by the wrong pol- He further said that the par- begin to normalize throughout
more than crowded out the icies of the Central government ty condemns the government’s the remainder of fiscal 2022, re-
spending on other non-discre- and its inept management of the ‘callous negligence’ on the price sulting in real GDP growth of
tionary items, like grocery and economy, said Congress leader hike issue. about 9.5 per cent.
utility services to such an extent and former finance minister P He also quoted the National A significant proportion of
that the demand for such prod- Chidambaram on Tuesday, hit- Statistical Office’s (NSO) press this rebound will be due to the
ucts has significantly declined,” ting out at the Centre over the release that pegged the country’s very weak base in the prior fiscal
he added. rising prices of fuel and other consumer price inflation at 6.26 year, when the economy con-
Ghosh warned that the high commodities. per cent, and said that this lev- tracted by a record 7.3 per cent.
spending on fuel also has an While addressing a press el of inflation amid the ongoing India’s fiscal settings are
impact on inflation, which has conference, Chidambaram de- COVID-19 pandemic had bro- weak, and deficits will remain
breached the upper end of the manded that the price of petrol, ken the back of the people. elevated over the coming years
RBI’s comfort band for the sec- diesel and LPG be immediately “The government and the even as the government under-
ond month running for June, reduced, and import duties re- RBI have sent an inflation target takes some consolidation.

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