Prime Minister Manmohan Singhon Friday said local taxes, octroi and mandi (market) taxes ought to be removed to ensure the smooth movement of essential commodities. Doing away with these levies has the potential to cool prices a bit.
There have been hints, at the Central level, of reducing excise and other indirect taxes to help check inflation.
Both show the corner into which the government has been pushed on the issue. Both remedies are partial at best. If local taxes are reduced, states are likely to demand money from the Union government to bridge the loss. If indirect taxes on commodities such as petroleum products are lowered, the Centre loses revenue. That means trouble at a time when government expenditure is historically high.
The remedy to inflation lies elsewhere: the government, however, is unwilling to admit the problem behind the inflationary spiral.