Due to the coronavirus outbreak, the prices of global crude oil saw a dip of nearly 30 percent. As a result, according to the SBI Ecowrap report, the petrol and diesel prices in India are likely to be lowered.
The State Bank of India and its team of researchers have published an ecowrap report which says that petrol prices in India may witness a drop of 12 rupees per liter and diesel prices up to 10 rupees per liter. Although this drop is the direct consequence of the severe drop in global crude oil prices, it entirely depends on the state and the center if they are willing to give the cut. However, if the governments are not willing to cut the prices, the report says, they must not increase the excise duty under any circumstance.
Major dent in the economy
The report also said that instead of passing on the benefit to the consumers now, the center can divert these funds to aid the lower-income groups who would be hit massively because of the coronavirus. The report also acknowledged that there is a need to revise the consumer demand.
As the coronavirus spreads across India and as the number of cases is nowhere reducing, the economic ruckus it has caused looks daunting to recover from. The lockdown in China may also cause a severe dent in the export industry.
Soumya Kanti Ghosh, the Group Chief Economic advisor at SBI and the one who has authored the report, said that adverse demand shock should be expected in sectors like tourism, airlines, and restaurants which in turn will affect other sectors.
The report is in accordance with the expected impact of the coronavirus in the country. However, there is no clue about the containment of the virus or the degree at which it will exhaust. This situation is in stark contrast to every economic situation the country has fought previously.
In a situation like this, according to Ghosh, only a rate cut will lead to a demand crisis in the future that might be irreversible. Ghosh believes that a combination of monetary and fiscal policy by the Reserve Bank might be the only reliable option at the country’s disposal.