Reserve Bank of India Governor Shaktikanta Das on Monday said the government’s decision to increase excise duty and road cess by Rs 1 per litre of fuel will not get reflected in inflation soon. “There is a meeting of Monetary Policy Committee in 1st week of August,” said Das, according to ANI. “Our internal team will assess it. It’s not as if it will get reflected in inflation the next day. There is a time lag.”
Finance Minister Nirmala Sitharaman had dismissed speculation that the increased levies on petrol and diesel could fuel inflation, saying that the decision was an attempt to meet public funding needs. Taxes on fuel, which account for over a third of retail fuel prices, are one of the primary sources of government revenue.
Petrol and diesel rates were increased on Saturday, a day after Sitharaman presented the annual Budget. Petrol rates have been increased by Rs 2.45 per litre while diesel prices have been raised by Rs 2.36 per litre.
Das said the RBI will discuss issuing overseas sovereign bonds with the government. Sitharaman had proposed to raise a part of the government’s gross borrowings from abroad.
Das added that the Budget provision of Rs 70,000 crore towards bank recapitalisation was a very positive development. It will help lenders not just comply with the regulatory requirement but also step up banking, he said. Nirmala Sitharaman had said that this was being done to boost the credit flow to the economy.
The Prime Minister Narendra Modi led-government has been forced to infuse record amounts of capital into public sector banks following an asset quality review amid allegations that lenders were hiding the extent of the bad debts on their books. It was initiated by the Reserve Bank of India in 2015 and led to surge in bad loans that were reported and necessitated an increase in provisions.
“Over the last five financial years, PSBs have been recapitalised to the extent of Rs 3.19 lakh crore, with infusion of Rs 2.5 lakh crore by the government and mobilisation of over Rs 66,000 crore by PSBs themselves,” Sitharaman had informed the Parliament on June 24.