Rising Petrol Prices

Rising petrol prices is not an uncommon feature in Indian economy as the nation has to import the majority of its inelastic demand of oil products. Therefore, the price of oil is functioned upon lot many extraneous variables which are not under the control of Indian government. But the present rising price in oil is mainly due to the factors which are within the realm of Indian government. The removal of subsidy as well as the high import taxes were the main culprit.


Rising petrol prices is a cause of concern for the reason also that it has a cascading effect upon other prices of the products, more importantly, the FMCG goods. The burden of all of this will finally bear by the consumers. This will further curtail the demand generating potential of the economy, as the rising prices will keep the large section of the population beyond the boundary that marks or signifies the demand potential of the economy. This has to be seen in the backdrop of the economic problems that nation is experiencing on account of the pandemic crisis.

Rising petrol prices is also augmenting income inequality in already high-income inequality nation. This is due to the fact that the rising petrol prices serves as the source of the indirect tax for the government and the indirect tax has the very peculiar characteristic of being regressive in nature.

High income inequality leads to declining consumption potential of the overall economy that hampers the smooth functioning of the macroeconomic cycle, which further influences the job and growth potential of the nation. This has to be seen in the backdrop of the rising unemployment in than nation to the unprecedented levels and at the same time the presence of the huge surplus of the demographic dividend at our disposal.

The right approach

No doubt, government needs the income for the development of the nation and it is not wise enough to extend the fiscal deficit for a long period of time as it could have serious repercussions in due course of time. And at the same time, the fact cannot be neglected that taxes serve as the major source for the government. But in spite of these reasonings, the fact remains that stretching taxes too much will only hamper the government in the long run and the prevailing situations might not lead to the situation of the stagflation on account of rising inflation.

The right approach should have been the rising of direct taxes, which is non- regressive in nature. And at the same time, the government should focus upon the transfer of money directly in the hands of the people that has the multifarious advantages.

Enhancement of the productive potential of the nation in the form of the human resource development is one of the major initiatives that Indian government needs to indulge in. As already been mentioned that the nation has huge demographic potential that needs to be harnessed and it can be only be transformed to dividends by improving productive potential of the nation.

About the author


My name is Vipal Bhagat, going to be doctorate in applied economics. My aim is to analyse and interpret the current economic happenings around us, according to the core and basic principles of economics.

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