The government expects the surge in vegetable prices to start coming under control from next month when new crops enter the market, a finance ministry official stated. While relief from increasing vegetable prices is expected, the increase in crude oil prices is a matter of concern, the official added.
Talking to PTI, the anonymous official noted that there is no expectation of a reduction in excise duty and the government is enhancing infrastructure investment, but private sector capital investment is yet to catch speed.
Elaborating on the government’s capital expenditure plans, the official noted that the Centre already spent 28 per cent of the budget estimates of capex by the end of the June quarter and this ratio is expected to touch 50 per cent by the end of September. Notably, the government increased capex by 33 per cent to Rs 10 lakh crore in the budget for the current fiscal year.
Additionally, the kharif sowing is expected to not be impacted in the least due to the 6 per cent deficit in rainfall, the official noted. He added that the government has been working to combat inflation by releasing wheat and rice stocks from reserves, putting restrictions on rice and sugar exports, and allowing pulses and oilseeds imports.
The report quoted the official and stated, “ Flexible trade policy has been adopted to keep prices down. We must remember that global food prices are very high due to the Ukraine war and the supply of food grains has been affected and that is a global factor from which Indian cannot remain isolated. We have taken measures to isolate our population from that inflation and relative to others we are in a much better position.”
Talking about tomato prices, the official noted that measures to cool down tomato prices have already been adopted and the effects of these are expected to be visible in the upcoming months. He added, “Tomato is a seasonal crop and we will get another crop shortly and the price pressure will ease. This temporarily high inflation is partly driven by vegetables. I expect the vegetable prices will contract quickly, likely by next month.” While retail inflation reached a record 15-month high of 7.44 per cent in July, wholesale price-based inflation remained in the negative zone for the fourth consecutive month at -1.36 per cent in July.
Addressing concerns on recent spikes in crude oil prices, the official stated that crude oil prices fluctuations don’t impact fiscal math. Citing that the government doesn't provide any subsidies to oil marketing companies, he noted that crude oil prices are not included in budget calculations.
Notably, crude oil prices are touching almost $85 per barrel, up from $70 - $73 a barrel from the time of the budget.
While the official stated that the surge is a concern, it is still within tolerable limits. He added, “It doesn't necessitate any policy adjustment right now. The budget calculations are on track. I think we are quite ok with oil at about USD 80-85, up to USD 90 we shouldn't be worried. Beyond USD 90 it has an impact on inflation and other things.” The ministry official also stated that the government is not planning on reducing excise duty on petrol, or diesel at the moment.