- Government may hike fuel prices before Diwali in November.
- Potential increase before key state assembly elections next year.
- Fuel price hike could push inflation above RBI's target.
The common man could be in for a significant financial shock right before Diwali. According to a Bloomberg report citing Alexandra Hermann Prasad, Lead Economist at Oxford Economics, the central government may slightly increase the prices of petrol and diesel in November. This timeframe represents the "last realistic window" for the government to raise fuel prices before campaigning intensifies for key state assembly elections scheduled for early next year.
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How Much Could Prices Increase?
The projected hike could be around half (approximately 3.75 per cent) of the cumulative 7.5 per cent increase seen in May due to the war in the Middle East. This revision is expected in states where elections are scheduled to be held early next year: Uttar Pradesh, Punjab, Uttarakhand, Goa, Manipur, Himachal Pradesh, and Gujarat.
Fuel Price Hike Could Drive Up Inflation Beyond RBI Target
If the government moves forward with increasing petrol and diesel rates in November, it will have a direct impact on inflation. According to the Oxford Economist, retail inflation could surge to 6.2 per cent in the October-December quarter and further to 6.5 per cent in the first quarter of 2027.
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These figures would be above the Reserve Bank of India's (RBI) target of 2 per cent to 6 per cent. Conversely, if authorities choose not to increase fuel prices in November, inflation expectations could soften by 10 to 30 basis points (0.10 per cent to 0.30 per cent) over the coming quarters. However, inflation is still expected to remain elevated.
RBI May Hike Repo Rates
To curb rising inflation, the Reserve Bank of India may further increase the repo rate in its upcoming meetings.
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The report shows that retail inflation reached 5.54 per cent in September, marking its highest reading since 2024. In such a situation, any increase in fuel prices will directly affect household budgets, making the central government's decision a focus point for consumers and markets alike.
(With Inputs From Jagran.com)