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‘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.
