COMMENT Dr. Soumya Kanti Ghosh, Group Chief Economic Adviser, SBI
The recent rupee depreciation with the rising crude oil prices has made the headlines and created anxiety. The rupee decline in consonance with rising crude has made a significant impact on domestic petroleum and diesel prices. This windfall gain will have positive impact on State finances, which might push down the states fiscal deficit by 15-20 bps, other things remaining unchanged.
We also estimate that since the states are having an incremental revenue over the budgeted one, they could cut on an average petrol prices by Rs. 3.20 /litre and diesel by Rs. 2.30/ litre, without affecting their revenue arithmetic, States like Maharashtra, Madhya Pradesh, Punjab, Tamil Nadu, Andhra Pradesh, Rajasthan and Karnataka have the privilege to cut petrol prices by at least Rs. 3 from their existing rates and Rs. 2.5 on diesel. We heartily welcome that Rajasthan and Andhra Pradesh have already pared rates.