Fuel price shield helping India and consumers to tackle West Asia crisis: Gita Gopinath
Mumbai, June 3
The government is already supporting the economy amid the ongoing West Asia crisis by not allowing the full impact of rising global oil prices to be passed on to consumers, according to Gita Gopinath, former Deputy Managing Director of the International Monetary Fund.
In an exclusive interview with ANI, Gopinath said the limited increase in retail fuel prices by the Indian government, despite a sharp rise in international crude oil prices, has effectively acted as an implicit subsidy for households and businesses.
"The government is already to some extent supporting the economy because it has not let prices at the fuel pump go up by as much as one would expect it to given how much world oil prices have risen," she said.
According to Gopinath, the pass-through of higher global oil prices to domestic fuel prices has been much lower in India than in many other countries.
"So that itself is like an implicit subsidy to households and companies," she added.
Responding to a question on what more the government could do to ease the financial burden arising from the West Asia crisis, Gopinath suggested that targeted support would be more effective than broad-based fuel subsidies.
She said that while some increase in fuel prices may need to be passed on to consumers, support measures should be focused on vulnerable sections of society and businesses that are most affected by higher costs.
"What probably will be called for is to let more of the price increase pass through, but then have much more targeted support to vulnerable households and companies as opposed to broad-based support in terms of fuel prices artificially low," she said.
Gopinath noted that targeted assistance would help provide relief where it is needed most while avoiding broader distortions in the economy.
"So I think that at this current moment, providing more targeted support is a good way to go," she added.
Her comments come as India, like many other countries, continues to monitor the economic impact of the West Asia crisis, including higher energy costs and disruptions affecting global supply chains.
Gopinath's remarks suggest that while the government has already provided support by limiting fuel price increases, future policy efforts may need to focus more on targeted assistance and structural reforms to help the economy navigate ongoing global challenges.
— ANI
Reader Comments
Finally someone from IMF acknowledging India's efforts! Buying crude from Russia at discounted rates has also helped keep prices low. But the common man is still feeling the pinch in other areas like LPG and electricity. Targeted subsidies for poor families and small businesses would be really helpful now. 🙏🇮🇳
The implicit subsidy is good for now, but as Gopinath suggests, we need structural reforms. India's economy has shown remarkable resilience despite global crises, but we can't rely on subsidies long-term. More investment in renewable energy and reducing our oil import dependence is the real solution. Let's learn from this and pivot towards sustainable growth.
I appreciate the government's efforts to shield consumers, but let's be honest - the relief isn't reaching everyone equally. Petrol prices have stayed stable, but what about transport costs for goods? That's affecting prices of everyday items. Targeted support for low-income families and small businesses would be more effective, like the article says. Good analysis from Gopinath!
Interesting perspective from India. The implicit subsidy approach seems to be working for now, but Gopinath's point about gradual pass-through with targeted support is economically sound. India's handling of the fuel crisis amidst West Asian tensions is noteworthy - balancing consumer relief with fiscal prudence. Will be watching how the government implements these targeted measures going forward.
Good to see India's proactive stance! The implicit fuel subsidy is definitely helping households and businesses absorb the shock. But I agree with Gopinath that targeted support for the most affected sectors is crucial - especially farmers, auto-rickshaw drivers,
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