The announcement of the hike on Thursday, coming soon after the release of fresh inflation data (August Wholesle Price Index was up 9.78 percent), will do nothing to tame inflation. On Friday, the Reserve Bank of India tightened the screws further by raising rates 0.25 percent – its 12th hike in this monetary tightening cycle.
The reason given for raising prices – the drop in the rupee-dollar rate, which is making crude imports costlier – appears unconvincing to some as there is no clarity on why and how price hikes are calculated. There is also suspicion that despite deregulation – which means companies set their own prices – the oil companies change prices only with a wink and a nod from the government.
SP Tulsiani, investment analyst, told CNN-IBN, that the weakening of the rupee is a bad reason for raising prices since the government may not allow the reverse if the rupee strengthens. “Even if the rupee strengthens to 45 to a dollar, do you think the government or the oil marketing companies will roll back the prices to the old level?” Read More
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