Economics of Petrol/Diesel Tax Cut in India | US Iran War, Fuel Tax Cuts & Hit to Indian Economy

Описание: With the US Iran war in full swing, the Strait of Hormuz closed, oil installations in the Middle East threatened and crude oil prices escalating, the Indian economy is particularly vulnerable, given its dependence on imported crude oil. There is a natural pressure on higher petrol and diesel prices, that currently is staved off by Oil Marketing Companies (OMCs) absorbing the higher crude oil prices by taking a hit on their margins. However, if the war goes on and crude oil prices were to escalate further, then there will be a strong temptation by the Modi government to start tinkering with petrol and diesel prices. A popular policy option for many is for the Centre and state governments to cut taxes on petrol and diesel. In this 104th episode of ‪@thebondeconomist‬, we discuss:
What are the taxes that India currently imposes on petrol and diesel?
How much taxes does the government collect annually?
How much taxes would the Centre and states lose if fuel taxes were cut?
What could happen to the economy if there were big tax cuts?
Are fuel tax cuts necessarily the best policy option in the circumstances?
Impact on India's fiscal deficit, credit rating and the economics of petrol & diesel pricing.

Chapters:
0:00 Petrol & diesel taxes in India
3:19 How big are the fuel tax collections?
5:16 Loss to the government from tax cuts
8:36 Ripples through the Indian economy
11:58 Do fuel tax cuts really work?

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Note: The information provided in this presentation are my personal views and should not be construed as the views or advice of my employer. My employer is not responsible in any manner and does not assume any liability or responsibility on your reliance with respect to the information stated here.

Data sources: PPAC, MOSPI, RBI, Ministry of Finance