Good POLITICS and good ECONOMICS are not synonymous to each other...let me give an example considering the current and previous governments with regard to the overwhelming increase in the prices of PETROL and DIESEL (this is for all those illogical economically illiterate meme creators/facebook_pages and wrongly directed general people through those memes/posts).
UPA government was keeping the petrol & diesel prices low by going crazy on fiscal deficit — in layman’s terms, they saddled the gover
As the government kept raking in more debt, the interest rates went up, industrial activities went down and inflation shot up. The inflation rate pre-2014 was 10% which is more than double the current inflation rate of 4.96%. I know most people don't exactly know the concept of inflation and so I am obliged to put that in layman's terms. I will put another post for that.
Now its basic mathematics that you cannot indefinitely keep taxes low and expenses high. At some point, something gives up and that is usually terrific inflation. That's exactly what happened during the UPA government...they highly subsidized PETROL/DIESEL to get more votes & good name and then tax something more obscure that will impact you, but you won’t even notice. It would be GOOD POLITICS, but not GOOD ECONOMICS.
Taxing petrol high should be a part of national policy for multiple reasons:
It is good for the environment. The money from taxing petrol goes indirectly to more energy efficient vehicles like trains and buses. If you still continue with your own vehicle, it both reduces your driving a bit and encourages you to buy more energy efficient cars.
It is good for our energy security. We are importing oil from dangerous places and the more we make petrol cheap, more we consume and more we get addicted.
It is good for our economy. Lowering petrol prices will both increase fiscal deficit and increase imports [weakening rupee]. Together they will raise inflation in the long term.
As long as the overall inflation is stable, petrol/diesel prices should be high. Unless we are getting into high inflation state [say in double digits], we should not reduce petrol prices.
However, I’m sure the BJP government would reduce petrol prices in the run-up to the central elections — as a vote-catching move.
Keeping petrol prices low is not something to be proud of and a difficult job either. Keeping overall inflation low is only to be a key achievement.
***alert: I know people stalking my posts recently who seem to disagree with my view (political and social). It's completely ok to disagree...I am not forcing my thoughts to anyone and it's my democratic freedom to express my views...so is yours or anyone else.
I write against anything that I feel wrong and back my opinion with facts. "To err is Human" ...so am I. Feel free to present your views if I seem to be biased or wrong in my opinion but only if you have facts to support.
Some people are sharing pics of petrol prices in different countries which are completely inadequate. You know the countries with high fuel taxes? Western Europe, Singapore, Japan. Even China is catching up [China emerges as a green reformer in vast petrol tax study]. You know who has lower petrol taxes/higher subsidies? Venezuela, middle eastern countries, Pakistan.
Whom do you want to emulate?
