Rising fuel prices eating into health spends: SBI report

What is the news?

A recent report by SBI shows that expenditure on non-discretionary items (including health) is reducing due to rising fuel prices. This calls for urgent lowering of prices through tax rationalisation.

Background:

• SBI has released a report which tries to show the relationship between rising inflation and expenditure on non discretionary items.
• The retail inflation has breached the 6% threshold owing to rising fuel prices. In many cities petrol has breached the Rs. 100/litre mark. 

Findings of SBI report:

• An analysis of SBI card spends indicates that spending towards non-discretionary health expenditure has been substantially reduced to accommodate increased expenditure on fuel. 
• In fact, such spending has more than crowded out the spending on other non-discretionary items, like grocery and utility services.
• The share of non discretionary spend on items like fuel has jumped to 75% in June, 2021 from 62% in March, 2021.

Way Ahead:

• Citing the data, the agency argued that there was an urgent need to lower fuel prices through tax rationalisation.
  • The governments, at the Centre and in states, have been mopping up revenue through high excise and VAT on petrol and diesel.
• A reduction in levies is desired as petrol in India is currently dearer than BRICS, Indonesia, Thailand and the US as per a report by CARE ratings.