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Need to reduce taxes and duties on petrol and diesel: RBI

The Reserve Bank of India (RBI) has advised the central and state governments to reduce the tax and surcharge on petrol and diesel, alerting about the rising inflation. In the monetary policy statement issued by RBI today, the inflation forecast for the financial year 2021-22 has been increased. It said that there is a need to combine excise duty, surcharge and taxes by the central and state governments to reduce the rising cost pressure due to inflation of petrol and diesel.

The central bank expects the risk of rising inflation on the back of rising international commodity prices, especially crude oil prices and rising logistics costs. It has kept the inflation forecast for the first quarter ending June 30 of the current financial year at 5.2 percent, while the inflation forecast for the next three quarters has been increased as compared to the statement of April. Inflation forecast for the second quarter has been raised from 5.2 percent to 5.4 percent, for the third quarter from 4.4 percent to 4.7 percent and for the fourth quarter from 5.1 percent to 5.3 percent. According to the RBI, the inflation rate for the entire financial year is estimated to be 5.1 percent.
The government intervention in the supply chain of pulses is now expected to bring relief to the prices of pulses, the statement said. It has been advised to strengthen supply to further reduce inflation of pulses and edible oils.

RBI Governor Shaktikanta Das said that if the second wave of COVID-19 lasts for a long time and due to this restrictions on activities continue, then inflation may increase. In that case, measures will have to be taken to keep the supply smooth to prevent the prices of essential food items from rising. The central and state governments will have to work together to increase supply and stop profiteering by retail traders.