How much inflation will be reduced due to reduction in the prices of petrol and diesel, know here

The common people have got a lot of relief due to the reduction in the prices of petrol and diesel by the government. It is expected that in the next 3 months and the coming 1 year, the common families will get to see the inflation hit by 2 percent.

On May 21, the central government had cut excise duty on petrol by Rs 8 per liter and on diesel by Rs 6 per liter. After this, many states including Kerala, Rajasthan and Maharashtra had cut VAT (value added tax). This has had a direct impact on Indian families as well. The survey conducted after the announcement of excise duty cuts on petrol and diesel showed a fall in inflation expectations by 190 bps and 90 bps, respectively, compared to the survey conducted before the tax cut, RBI said.

A survey conducted before the RBI cut excise duty on petrol and diesel showed inflation expectations for the upcoming three months and one year at 10.8 per cent and 11.1 per cent. However, the second survey (May 24-28) conducted after the cut in excise duty on petrol and diesel, showed households' expectation of the next three months and the next one-year inflation at 8.9 per cent and 10.1 per cent.

The average inflation expectation of households for the current period has increased by 40 basis points (bps) compared to the March 2022 survey, while it has increased by 10 bps and 30 bps for the next three-month and one-year periods, respectively. The survey was conducted from 2 to 11 May 2022 in 19 major cities, the results of which are based on the responses of 6,062 urban households.

RBI said that in view of the reduction in petrol and diesel prices on 21 May 2022, a limited follow-up survey (hereinafter referred to as 'extension survey') was conducted during 24-28 May 2022, covering nearly half it was done. These families had given feedback in the regular survey rounds. Overall, 3,036 households gave their revised expectations of inflation (quantitative) in the extension survey. Inflation expectations for three months and one year ahead have declined by 190 bps and 90 bps, respectively, in the extension survey round compared to the regular round.

In the monetary policy statement, Shaktikanta Das also said that there are increasing signs of higher pass-through of input costs to selling prices. The Monetary Policy Committee noted that inflation is likely to remain above 6 per cent during the first three quarters of 2022-23.

Retail inflation in India stood at an eight-year high of 7.79 per cent in April. RBI has revised its inflation forecast for 2022-23 to 6.7 per cent, from 5.7 per cent estimated earlier.

RBI Consumer Confidence Survey

RBI said that consumer confidence is improving steadily since July 2021. Sentiments on key parameters such as employment and household income have further improved in the latest round of the survey. The households estimated the increase in their current expenditure and expected it to increase further in the next one year. RBI said in the survey that they expected higher essential spending, while sentiment on non-essential spending has been weak.