InvestorQ : Will the cut in excise really impact inflation and what about the revenues lost by the governments?
Sam Eswaran made post

Will the cut in excise really impact inflation and what about the revenues lost by the governments?

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Moii Chavate answered.
3 weeks ago
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There is a cost to it and it is estimated that the hit by the central government due to the cut in excise duty on petrol and diesel will be close to Rs.45,000 crore. While that is a big amount, it is a small price to pay to avoid the risk of cost push inflation that is making the Indian goods uncompetitive in global markets. Instead of infusing liquidity into the system or cutting rates, this is seen as a much easier and a much more effective choice.

The biggest benefit of this move by the government will be that it will sharply lower inflation in the coming months as the impact gets absorbed. For the last few months, fuel inflation and transport inflation have been consistently in double digits. These items in the basket have a strong downstream effect. With the reduction in excise and VAT, diesel prices will come down by Rs.18-19 per litre on an average and the soothe the inflation fires.

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