A finance ministry official said Crude Oil Prices are still below USD 90 per barrel, but the government is worried about their rise. The government expects vegetable prices to reduce next month when fresh crops arrive. The source said excise duty was not planned to reduce and that the government was driving infrastructure investment while private sector capital expenditure was still young. Lack of rain by 6% is unlikely to affect kharif sowing.

He said that by the end of September, the Center’s capital spending, which was 28% of Budget forecasts at the end of the June quarter, will be 50%. The government increased the capital investment spending in the 2023–24 budget by 33% to Rs 10 lakh crore for the current fiscal year. The insider stated a 6% rainfall deficiency won’t affect kharif sowing because the agriculture industry is strong. The government has freed wheat and rice stocks, restricted sugar and rice exports, and allowed pulses and oilseed imports to lower inflation.

Due to the Ukraine war, there are unusually high food costs worldwide.

To keep prices low, a flexible trade strategy has been implemented. We must keep in mind that the Ukraine War has caused a significant increase in global food costs and has impacted the availability of food grains. This is a global issue from which India cannot stay insulated. In comparison to others, we are in a lot better situation since we have taken steps to protect our citizens from that inflation, the official claimed.

He said that initiatives taken to lower tomato costs will start to pay off in the coming months. Since tomatoes are a seasonal commodity, the price pressure will lessen once we receive a new harvest. “Vegetables are a contributing factor in this momentarily elevated inflation. I anticipate a substantial decline in vegetable costs, maybe by next month,” the official continued. Retail inflation rose from 4.87 percent in June to 7.44 percent in July, a 15-month high. July wholesale price-based inflation was (-)1.36% for the fourth month in a row.

The basket of vegetables had 37.44% annual retail inflation in July, spices 21.63%, pulses and goods 13.27%, and cereals and products 13%. If the government was concerned about the recent jump in Crude Oil prices, the official noted that because the government does not subsidize oil marketing businesses, crude oil prices are not included into budgets. Thus, oil price fluctuation does not affect financial math.

Crude oil costs USD 85 per barrel, up from USD 70–73 when the budget was developed.Oil marketers are concerned about rising crude oil prices, but they are still manageable.

Right now, no changes to policy are required. The estimates for the budget are accurate. I believe that as long as the price of oil stays between USD 80 and USD 85, we shouldn’t be concerned. It affects inflation and other things when it exceeds USD 90, the official stated.

The official also said that any reduction in the excise tax on gasoline and diesel was not currently being considered. “We are not anticipating any excise duty reduction in gasoline or diesel,” he continued.

Conclusion:-

A finance ministry official expressed concern about rising crude oil prices, stating that they are within a manageable range of USD 80-85 per barrel. The official expects vegetable prices to decline starting next month as fresh crops enter the market. The government has increased capital investment spending in the 2023-24 budget by 33% to Rs 10 lakh crore. The lack of rain by 6% is unlikely to affect kharif sowing. The government has released reserves of wheat and rice, restricted sugar and rice exports, and opened the door for imports of pulses and oilseeds. The Ukraine war has caused high food costs worldwide, and a flexible trade strategy has been implemented to keep prices low. As a seasonal product, tomato cost reductions could pay off in the coming months. Retail inflation rose from 4.87 percent in June to 7.44 percent in July, a 15-month high. The insider claimed crude oil price volatility has no impact on financial calculations since budgets do not account for it.

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