Peculiar Case of Inflation in India

Someone asked me why do most of the non-BJP ruled states have higher fuel prices than that of BJP ruled states? Don't they realize that it'll be the reason for high general prices?

First of all, I wanted to ignore this question due to its political reason but after a while I decided to respond knowing the fact that the answer to this question is very peculiar. If I try to remain politically correct, there would not be a factual and satisfying answer to this question. It is not possible at all to be politically correct and answer this question both at the same time!

As a matter of fact, most of the non-BJP ruled states are charging higher VAT on petroleum products than the BJP ruled states. As a result, the oil prices are higher in Non-BJP ruled states. But it is not that simple. It is more complex than it looks at face.

Fuel prices in India are influenced by various factors, including international crude oil prices, exchange rates, central and state government taxes, and dealer commissions. While the central government sets the base price of fuel through taxes and duties, states also impose their own taxes on fuel, which can vary.

The Bharatiya Janata Party (BJP) often highlights the difference in fuel prices between states ruled by their party and those ruled by opposition parties. They argue that states governed by opposition parties tend to impose higher taxes on fuel, contributing to higher prices at the pump. However, the reality is more nuanced.

Fuel pricing is a complex issue affected by global market dynamics, domestic policies, and state finances. Most of the non-BJP ruled states indeed have higher fuel prices due to higher state taxes, while others have similar or lower prices. However, it has nothing to do with political affiliation of the state government but on the state policies and financial needs. States with high fiscal deficits or limited revenue sources mostly rely more on fuel taxes to fund their expenditures, irrespective of the ruling party.

They know it very well that higher oil prices result in higher general prices which is reflected in higher state inflation but they don’t care because as per popular narrative, it is the responsibility of the central government to control inflation! High inflation gives Non-BJP state governments two hunts in one bullet: a pretext to keep on accusing the central government to distract the attention of the public from real issues as high prices result in financial distress and can be easily experienced by citizens and more resources to further their respective politics.

It should be noted that there are some products including petroleum products and liquor products which don’t fall under the ambit of the Goods and Services Tax (GST) rather Value Added Tax (VAT). Basically states don’t want petroleum and liquor products to be under GST!

No comments:

Post a Comment