India has recorded the fourth consecutive hike in the prices of petrol and diesel on Monday in less than two weeks and this has taken the total price hike at nearly Rs 7.5 per litre now.
Senior economist and the founder of Nikore Associates, Mitali Nikore believes “the fuel price situation presents a difficult fiscal picture. Prior to the recent hike, the government was incurring losses of nearly ₹1,000 crore per day on fuel subsidies. The cumulative price increase of ₹7.5 per litre has provided some relief, bringing that daily loss down to an estimated ₹500–600 crore — but the government continues to bleed. If crude oil prices remain elevated, a further staggered hike of ₹10–12 per litre over the coming months is a plausible outcome. The rationale for a staggered approach is sound as it avoids a sharp, one-time cost shock to consumers and slows the pass-through to broader inflation. There are some encouraging signs — crude prices have eased somewhat — but it would be premature to read this as a sustained correction. The central policy challenge is managing the pace of price adjustment without triggering a sharp inflationary spiral, particularly at a time when household budgets remain under pressure.”
Managing Director at Flexi Capital, Nasser Salim feels “Fuel driven cost push pressures tend to broaden inflation beyond the energy component and with global crude still elevated this could keep headline inflation closer to the upper tolerance band of the RBI’s 2-6% framework.”
Whilst, Senior Business Economist at Talk the Walk and capital markets specialist, Sanchita Mukherji believes
“the sudden acceleration of hikes looks like an aggressive shift, but energy analysts view it as a delayed catch-up mechanism. Energy economists point out that corporate cash reserves evaporate incredibly fast at a loss rate of ₹1,000 crore a day. Allowing OMCs to bleed out poses a systemic risk to India’s energy security, infrastructure capital expenditure, and eventual transition to cleaner alternatives. In a country that imports over 85% of its crude, letting retail prices rise naturally subdues discretionary consumption. This acts as a macroeconomic pressure valve, defending India’s foreign exchange reserves and preventing a wider balance-of-payments crisis while global trade routes like Hormuz remain bottlenecked. Ultimately, the situation highlights the delicate tightrope India walks; it must balance the micro-impact of expensive logistics on food inflation against the macro-necessity of keeping its energy supply chain financially solvent.”
