Petrol and diesel prices are now back to where they were in December 2014. In fact, they are slightly higher. That raises the important question: Is the boost given to the economy as a result of lower fuel prices in danger of coming to an end? Note that both petrol and diesel prices were lower for most of 2015 than they are now. If prices stay where they are now, or edge higher, what effect will it have on inflation?

As the chart shows, petrol and diesel prices in Delhi since 17 May have been revised to 63.02 a litre and 51.67 a litre, respectively. Compare that to petrol and diesel prices of 61.33 per litre and 50.51 per litre, respectively, on 16 December 2014. On the other hand, the Indian basket of crude oil has declined 18% so far, from 16 December 2014 to last Friday, according to data from Petroleum Planning and Analysis Cell.

One reason for the variance is that the government chose to retain some portion of the benefits by increasing taxes. Two, the decline in specific product prices and related crack movements too results in differences in the prices of specific products and broader crude. Nevertheless, the fact remains, as this column has highlighted earlier, consumers haven’t gained commensurately in comparison to the broader decline in crude prices. And now, as the chart shows, we are status quo on this matter.

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