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Contents
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.
