At a time when oil prices are rising steeply and the rupee is falling, West Bengal Finance Minister, Amit Mitra, expressed concern that the country’s Gross Domestic Product (GDP) growth rate may be negatively hit.
Alleging that the Centre was unable to create any advantage for India when oil prices were muted during February 2016 by increasing reserves and thereby creating a buffer stock and its inability to create a fuel stabilisation fund, Mitra said, “When oil prices are high, you (Centre) could use the reserves, you (Centre) could also have a possible fuel price stabilisation fund which I don’t think many people (countries) have”.
Speaking at the Annual General Meeting of the Bengal Chamber of Commerce and Industries, Mitra said that both India as well as the US have strategic petroleum reserves, which hoard oil underground and build a buffer stock which can be unloaded in times of crisis.
In India, the Indian Strategic Petroleum Reserve Ltd is tasked with storing fuel.
“Even in a vast economy like the US, they have a minimum reserve of about 60 days – my suspicion is maybe 80-100 days. Unfortunately, India’s reserves could be between 5-10 days - 10 days they (Centre) say but my suspicion is more like five days," he alleged.
Mitra further said that the economic crisis India was undergoing was of “deep concern” as inflationary expectations could set in and sabotage the GDP growth rate in the country.
He explained that at a time when the rupee was falling as compared to the dollar and oil prices were spiking, Reserve Bank of India's (RBI) decision to increase the interest rate could damage the economic framework.
While EMIs have become costly for the common man, investors’ ongoing, or planned projects, face the risk of turning unviable.
“I am deeply concerned that this kind of a drop in the Rupee, the petrol price and the ecosystem of inflationary pressure could lead to this process – what it means is the GDP growth rate will be negatively hit. This is my deep concern and as entrepreneurs you must tighten your belts”, he told entrepreneurs in his address.
Taking a further dig at the Modi government in face of rising fuel prices, Mitra said, “It is a very difficult situation when the Centre increased their own excise duty from Rs. 9.48 to Rs. 19.48. Again on diesel, when they came to office, it was Rs. 3.56 per litre, and they raised it to Rs. 15.33 per litre now. As a contrast, in the state, we could have increased our sales tax or cess, we didn’t and yesterday as a gesture of being with the people the chief minister announced a Re. 1 reduction which has gone into effect today”.