MUMBAI:

A research report by the State Bank of India (SBI) has said that had the government not hiked excise duty on petrol and diesel, it would have added at least an additional percentage point to gross domestic product (GDP) growth. The report said that not hiking duties would have put Rs 90,000 crore in the hands of consumers, which could have provided additional demand in the economy to the extent of 1% of GDP.According to Soumya Kanti Ghosh, chief economic adviser, SBI, the multiplier impact of the consumption triggered by lower prices would be at least twice the direct impact.Or, in other words, GDP growth would be three percentage points higher if consumers paid less for fuel and spent the money on consumption.Lower oil prices would also have resulted in decline in inflation, giving the Reserve Bank of India headroom to ease monetary policy. “We need sentiment to pick up and consumer to start spending for investments to revive. The wage revision payout following the 7th Pay Commission recommendations and the ‘one rank, one pay’ (OROP) proposals will result in demand picking up after a time lag. What we need is an immediate pickup,” said Ghosh.Without additional central excise duty from petrol and diesel retail selling prices (beginning FY15), the hypothetical petrol price per litre would be Rs 47.63 (Actual: Rs 59.63), and diesel would be Rs 38.96 a litre (Actual: Rs 44.96) at Delhi. “Interestingly, the government has provided around Rs 54,000 crore for 7th Pay Commission and OROP in the Budget against the provision of Rs 92,000 crore. In effect, this means that if wishes were horses, the decline in oil prices in itself may have provided the much needed impetus to demand and we may not have to wait for the pay hikes.”The SBI report comes in the wake of the latest round of fuel price hikes by the government. On March 16, 2016, the government increased the petrol prices by Rs 3.07 per litre, while diesel prices have been hiked by Rs 1.90 per litre in Delhi. After the revision, a litre of petrol in Delhi will cost Rs 59.68, while diesel will retail at Rs 48.33/litre. Petrol in Kolkata, Mumbai and Chennai will cost Rs 63.76, Rs 65.79 and Rs 59.13 a litre respectively.Even as crude oil prices crashed in the international market, the government began hiking excise duty rates on petrol and diesel products to bridge the fiscal deficit. “Since November 2015 this fiscal, the government has raised the excise duty on five occasions. The excise amounts levied add up to Rs 4.02 per litre on petrol and Rs 6.97 on diesel, handing the government Rs 17,000 crore as additional revenue,” the report said.