Reserve Bank of India (RBI) Governor Shaktikanta Das on Friday put onus on both the Centre and states to ensure through concerted policy measures that current cost build in petroleum products and industrials raw materials does not escalate further.
Without directly seeking a cut in excise and VAT levies, the RBI Governor said that petroleum product prices have reached historic highs as international crude prices surged in recent months and "the high indirect taxes remain", both in the Centre and states.
Petrol and fiscal prices in the country has reached historic high levels. Apart from global movement in crude prices, high indirect taxes on the two products have contributed to its retail prices getting elevated.
In a video statement after the Monetary Policy Committee's bi-monthly meet, Das said the spike in petro product prices, along with the sharp increase in industrial raw material prices have resulted in a broad-based increase in prices of services and manufacturing products in recent months.
This if not checked through policy action by governments, Das indicated could have a bearing on inflation that has showed signs of easing.
The RBI had build the recent cost pressure coming into various sectors while giving its outlook on inflation. It has revised CPI inflation projection to 5.2 per cent for Q4:2020-21, 5.2 per cent to 5.0 per cent in H1:2021-22 and 4.3 per cent for Q3:2021-22, with risks broadly balanced.
After breaching the upper tolerance threshold continuously since June 2020, CPI inflation moved below 6 per cent in December 2020 for the first time in the post-lockdown period, supported by favourable base effects and a sharp fall in key vegetable prices, the latter accounting for around 90 per cent of the decline in headline inflation during November and December 2020.
Both higher fresh arrivals and active supply side interventions contributed to this favourable development, Das said.
It is expected that vegetable prices will remain soft in the near-term, while pressures may continue to persist in certain key food items, he said.
