Diesel price de-regulation may prompt rate cut: Ind-Ra
21/10/2014 12:38
Leading rating agency India Ratings (Ind-Ra) reckons that the government decision to decontrol diesel prices may prompt a swifter policy easing move from the Reserve Bank of India (RBI) while scrapping the diesel subsidy will lower the fiscal burden on Asia’s third biggest economy which grew at the fastest pace in more than two years in Q1 FY 2014-15.
The cabinet over the weekend decided to deregulate the prices of diesel; India’s most consumed fuel, which resulted in an Rs 3.37 per litre cut in the retail rate of diesel. .
Allowing prices of diesel to move as per market rates may help bring down the exchequer’s oil subsidy burden by Rs 15,000 crore, India Ratings reckons.
Further, a cut in diesel prices may help lower inflation, leaving more room for the RBI to cut interest rates.
“The union government’s decision to deregulate diesel prices will significantly improve the country’s finances as the oil subsidy will come down by INR150bn. Also, the cut in diesel prices by INR3.56/litre will go a long way in fighting inflation, which is trending downwards. This will create more space for the Reserve Bank of India to ease its policy stance and cut policy rate sooner than hitherto believed”, the rating agency said.
21/10/2014 12:38
Leading rating agency India Ratings (Ind-Ra) reckons that the government decision to decontrol diesel prices may prompt a swifter policy easing move from the Reserve Bank of India (RBI) while scrapping the diesel subsidy will lower the fiscal burden on Asia’s third biggest economy which grew at the fastest pace in more than two years in Q1 FY 2014-15.
The cabinet over the weekend decided to deregulate the prices of diesel; India’s most consumed fuel, which resulted in an Rs 3.37 per litre cut in the retail rate of diesel. .
Allowing prices of diesel to move as per market rates may help bring down the exchequer’s oil subsidy burden by Rs 15,000 crore, India Ratings reckons.
Further, a cut in diesel prices may help lower inflation, leaving more room for the RBI to cut interest rates.
“The union government’s decision to deregulate diesel prices will significantly improve the country’s finances as the oil subsidy will come down by INR150bn. Also, the cut in diesel prices by INR3.56/litre will go a long way in fighting inflation, which is trending downwards. This will create more space for the Reserve Bank of India to ease its policy stance and cut policy rate sooner than hitherto believed”, the rating agency said.
