Will hike in fuel prices dent your finances?

Fuel prices have gone up across the country after Budget 2019 levied a cess of ₹1 per litre and an equal amount of excise duty on petrol and diesel. Typically, when fuel prices rise, so does inflation, which not only makes goods and services expensive but also eats into investment returns. Higher the inflation, lower will be your real or inflation-adjusted returns. India’s retail inflation marginally accelerated to 3.18% in June from 3.05% a month ago. So should you be worried that it will increase further once the impact of fuel price rise plays out?

You shouldn’t, say experts, as the current fuel price rise won’t lead to a huge increase in inflation. “The increase in petrol and diesel prices may have a modest impact on discretionary consumption growth, particularly in urban areas,” said Aditi Nayar, principal economist, ICRA Ltd, a rating agency.