By Admin - Consumer Price Index, impact of cost increases on companies.
Petrol-Diesel Price: The ongoing tension in the Middle East is affecting many countries including India. There is a continuous increase in the prices of petrol and diesel in India. Rating agency Crisil has said in one of its reports that the increase in the prices of petrol and diesel can create new inflationary pressure on the Indian economy. In the coming months, the impact of increased costs of transport and manufacturing may be directly visible on user prices.
When did the prices of petrol and diesel increase?
- May 15 – For the first time, petrol and diesel increased by Rs 3 per liter.
- May 19- For the second time there was an increase of about 90 paise.
- May 23- Petrol became costlier by 87 paise and diesel by 91 paise.
- May 25- Petrol became costlier by Rs 2.61 and diesel by Rs 2.71.
In this way, overall petrol and diesel have become costlier by about Rs 7.5 per liter in four times. CRISIL says that if global crude oil prices remain high then there is a possibility of further increase.
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The impact may increase up to Rs 10
According to the report, oil companies are gradually reducing their losses. In such a situation, the total increase can reach Rs 10 per liter. Crisil said that its effect will be visible in the entire economy in the form of increase in transport costs, which may lead to increase in both food items and core inflation.
The direct impact of increased fuel prices on Consumer Price Index (CPI) inflation is estimated to be around 36 basis points. If the total increase reaches Rs 10 per liter then this impact can increase to about 48 basis points.
Most affected on transport sector
Let us tell you that in India, about 71 percent of goods are transported through road transport. Fuel cost in this sector is about 42 percent. In such a situation, if fuel becomes expensive, the cost of freight and logistics will increase rapidly and the supply chain will be affected. The increase in transport costs will have the biggest impact on those items that are dependent on logistics such as dairy products, tea, coffee, fruits, pulses, spices, eggs, meat and fish.
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Pressure on core inflation also
According to CRISIL, pressure on core inflation may also increase as companies will have to face rising costs of crude oil, gas and transport. Along with this, there is a possibility of increase in prices in sectors like clothes, electronics, wood, cement and ceramics.
In case of stable demand, companies can either increase prices or adopt a strategy like shrinkflation, in which prices are kept stable by reducing the size of the product. In the first two months, the average price of crude oil was around $ 112 per barrel, which is much higher than the estimated $ 95. Due to this, there is pressure on inflation.