‘High oil taxes curbed consumption, investment’: 

‘High oil taxes curbed consumption, investment’: 

Context:

NITI Aayog’s next Vice Chairman Rajiv Kumar believes focus should be job creation, not claims of economic victory

Introduction:

• The Centre’s reliance on higher taxation of petroleum products to mop up revenue could be in for review.
• The government raises taxes on petroleum products on more than one occasion, principally to mop up resources for keeping its fiscal deficit targets.
• Consequently, domestic prices of petrol declined by only Rs 10 per litre over the past 18 months, whle global oil prices have plummeted from $100 per barrel to $ 40.

Impacts:

• Fresh taxes levied on petroleum products helped prop up revenue, but ended-up restraining consumption as well as investment demand in the process.
• The fiscal bananza from the oil price decline caused ‘a degree of complacency’ in expenditure management.

Conclusion:

The government should focus on maximum employment creation, which is critical to meet the ‘exploding aspirations of his young supporters’ and “will automatically yield a near double digit rate of GDP growth for the next decade and an average of 7-8% for the next three decades.