Oil, budget and economic sentiment
There is some merit in the argument that inflation is a bigger dampener on economic sentiment in India than low growth rates. Traditionally, Union budgets have mattered for people at large because of two reasons: prices of goods and income tax rates. With the roll-out of the Goods and Services Tax (GST) in 2017, the Budget has lost its importance as a determinant of prices. The GST has subsumed central and state indirect taxes on most domestically produced goods and rates are decided in the GST Council. However, the budget still has a major influence on the price of an important commodity: fossil fuels such as petrol and diesel. What the forthcoming budget does regarding prices of petrol and diesel will have important implications for the economy. Here are four charts which explain this in detail.
Petrol-diesel taxes were increased post-pandemic
As the world came to a standstill after the pandemic, consumption of petroleum products crashed. This led to a sharp fall in petroleum prices as well. Brent crude – the international benchmark for crude oil prices – fell to $9.12 per barrel on April 21, 2020, the lowest level in 21 years.
