By reducing levies on petrol and diesel, the government has signalled a clear intent to fight inflation through tax cuts. Power, fertiliser and CNG prices will be closely watched
Over the last quarter, rising energy prices had put policymakers in a dilemma: Raise them and risk an upsurge in inflation or cut them and risk a dent in government finances.
An announcement of a duty cut on petrol and diesel on Saturday made it clear which side the government is on—cut duties and risk a dent in government finances while keeping inflation in check. With this, it is unlikely that the full extent of rising petrol and diesel prices will be passed on. Several states also moved to cut levies.