After demonetization and GST, the Indian middle class is facing a fresh onslaught on their budget, thanks to the financial policies of the Narendra Modi government. The steep hike in prices of petrol and especially diesel and the resultant general price rise coupled with unemployment and rampant underemployment, is sure to throw a common man’s life topsy-turvy even as the government claims it has brought ‘acche din’ to most Indians.
The oil prices are surely governed by international factors and they are beyond the control of any sovereign state. India, being a major crude importer, is likely to suffer heavily whenever the oil prices head north. Probably, it would be wrong to blame Modi government alone for the global oil price rise. However, what the Modi government is doing wrong and without empathy for the sufferings of the common masses is levying hefty and repeated taxes on the oil and diesel to make India a country with one of the highest fuel prices in the south Asian neighbourhood.
What most of the people didn’t know is that the Modi government has had a windfall on the economic front that was not of its making. Soon after Modi took over in 2014, the international oil prices had come down drastically. The new government was able to save millions since its import bill on oil had got reduced drastically. It helped government project a rosy picture of the economy. The experts kept warning that this scenario would change. However, the government, instead of passing on the advantages of this to the consumers, used the opportunity to levy more taxes on the petrol and diesel to shore up its revenues. According to a media report, the revenue from excise duty on oil products rose from Rs 1 lakh crore in 2014-15 to 2.42 lakh crore in 2016-17. This gave the Modi government huge leeway with spending on populist schemes and even launching a publicity drive on its achievements.
Even state governments are no less. Since petrol has been kept out of the GST regime, the revenue strapped State governments have been steadily increasing the levies on oil to fill their coffers. In effect, the oil companies were buying the oil at a cheap price while the government had imposed heavy taxes on it raising its prices for consumer. Half of the price that a consumer pays for petrol and diesel goes towards the taxes levied by the central and state governments.
Rise in petrol prices has a domino effect on prices of all commodities. Besides it causing an automatic increase in transportation costs, this also throws the prices of virtually everything we use in a spin. Coming as the latest rise in petrol and diesel prices is quite close to the next general elections, it’s surely going to lead to huge backlash for the government which citing fiscal prudence has point blank refused to bring the prices down by withdrawing a part of levy in fuel. Financial experts definitely want the government to have large revenues so that it can go ahead with conventional development schemes.
However, in a country like ours where the economic disparities are huge and the gap between rich and the poor is ever increasing, the governments need to listen to the peoples’ immediate woes and respond. Empathy is the last word with the current government and that is the sad part of Indian growth story. As against this, the government’s patronage and favouritism to a few industrialists and business houses and helping them grow even bigger is further fuelling peoples’ anger. The big businesses that have wilfully defaulted on loan repayment to the public sector banks are able to go scot free and even leave the country. The government has done little to prevent the escape of such people. It can only tax the common people of India and make their life miserable.
Price rise will soon overwhelm the middle class and the poor more so, towards the end of the season when prices of food items like fruit and vegetables usually rise. The government refuses to accept that its ill-thought out demonetization has already wreaked havoc on the lives of the poor and a section of economy. The unemployment among the poor has increased with many informal sector ventures closing in the wake of note ban and later under the impact of GST. Among the educated and skilled people the underemployment is a huge phenomenon that is yet to be mapped by the government. Particularly the vulnerable sections like women have been eased out of the workforce.
In the middle of this bleak scenario, rise in the prices of essential commodities will only add to the chagrin of the common people.
The government seems unperturbed over the public anger, probably believing Narendra Modi’s charisma is immortal. The BJP may also be planning to divert public attention by using its divisive ploys to win the elections. However, given the public mood over price hike, joblessness and hyped up achievements of the Modi government, it is unlikely to have a smooth sailing.
(Published on 17th September 2018, Volume XXX, Issue 38)