Concerns raised over rising fuel prices at RBI’s policy panel meet

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The Reserve Bank of India’s (RBI) monetary policy committee (MPC) members are concerned about inflation as a result of the government’s decision to pass on rises in global oil prices to consumers while preventing corrections through higher taxes.

According to the minutes of the MPC meeting released on Friday, keeping the issue of inflation in mind, J R Varma, one of the members had voted to increase the reverse repo, that is the rate at which banks lend to the RBI. MPC votes only on the repo rate, the reverse repo rate is outside its purview.

With rising auto fuel prices, there have been concerns over the rigid price pressures. Many have demanded to cut taxes to help ease the price of petrol and diesel across the country.

According to Union finance minister Nirmala Sitharaman has stated difficulty in bringing down fuel prices due to the burden of UPA-era oil bonds. She has said that if she did not have the burden to service the oil bonds, she would have been in a position to reduce excise duty on fuel.

Previously, RBI governor Shaktikanta Das stated that diesel and petrol prices operate as cost-push factors in a variety of activities. “It’s not simply passengers that drive or ride bicycles. The cost of manufacturing, transportation, and other components are all affected by high fuel costs,” Das had remarked in a speech in February.

In July the retail inflation showed some signs of moderation. However, the wholesale price inflation continued to remain in double digits for the fourth consecutive month.

The RBI has paused its rate-cutting cycle due to stubborn inflationary pressures. It has committed to maintain an accommodating stance to help boost growth and support the economy to a high growth trajectory.

In the meeting, Das made a strong case for maintaining monetary policy assistance, citing economic slack and inflation driven by supply-side factors. “At this time, continued policy assistance with a focus on resuscitation and sustenance of growth is undoubtedly the most desirable and wise policy option,” Das said, arguing for the status quo. “Overall, the economy still needed assistance in the form of favourable financial conditions and fiscal stimulus. Can we really pull the rug out from under the economy at this vital juncture? “Das said.