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Indian inflation set to touch double digit figure as govt increases fuel prices

The government hiked the price of diesel by Rs 3 a litre, kerosene Rs 2 a litre and cooking gas by a Rs 50 a cylinder to raise Rs 21,000 crores. The government has reduced customs and excise duties on petroleum products to the tune of Rs 49,000 crore a year. The government subsidy prior to this raise stood at Rs 1,71,140 crores.

The government's oil secretary G C Chaturvedi said that this decision will add 30 basis points to the country's headline inflation. But DK Joshi, chief economist at ratings agency Crisil, said, "The total (direct and indirect) impact of the diesel price increase could be around 100 basis points." Diesel has weight of 4.67% in the wholesale price index.

More inflation will further moderate economic growth rate as the country’s central bank RBI has hinted at more rate increases. 

"This kind of an increase in the fuel prices, gas and diesel in particular, will have a cascading effect, as a result of which there will be further rise in inflation. We the citizens of this country should understand that this government is no more for aam aadmi," said BJP Spokerperson Nirmala Sitharaman.

All major sectors such as transport, auto, manufacturing FMCG, textiles and energy will get effected as their input costs will sharply increase. 

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