At a time when the world was facing energy, oil and supply chain crisis due to closure of the Strait of Hormuz amid US-Iran conflict, India managed to handle the crisis with utmost ease, said Chief Economic Advisor V. Anantha Nageswaran.
He also said that not a single fuel store ran out of stock and citizens who requested a cylinder received one, without any hassle, adding that India did not face “1991 or 2013 moment” and the macroeconomic situation remained stable.
“This was not a coincidence or an outcome of pure luck. It was the result of a government that made its decision to act as it had during the pandemic: methodically and progressively, piling one measure upon another instead of aiming for a single dramatic lever,” he stated.
The CEA pointed out that the household was the government’s top priority during the crisis. Every kitchen had its cylinder and not a single retail stock ran out of supply.
Nageswaran said that a 14.2-kg cylinder’s import-linked price increased to more than Rs 1,600, however, the household price remained close to Rs 900, and even less for the poor sections.
On fuel that drives the whole economy, Nageswaran said the government chose to absorb the shock rather than pass it on to the consumers. It minimised the burden on aviation fuel and reduced the excise fee on petrol and diesel by Rs 10 per litre, forgoing almost Rs 1.7 trillion in revenue.
Moreover, marketing firms maintained constant pump prices for over two months prior to a single moderate adjustment, highlighted Nageswaran.
He said it is important to put the logic simply: In a situation like this, only the government has the balance sheet and time horizon to take on the risk and thus, it decided to absorb the burden on the fiscal account rather than put it on individuals and companies.
Nageswaran added that the covid-era model of “focused and successful interventions” was followed by special assistance for airlines and a credit-guarantee program for micro, small and medium-sized businesses.
In the same breath, Nageswaran highlighted that India quickly expanded its sources, boosting imports from the US and Russia and adding new suppliers in order to reduce the amount of energy that came through the Strait and get waivers required to continue purchasing Russian oil.
Furthermore, a coal gasification program, a further push on ethanol blending, strategic oil storage agreed upon during the PM’s visit to the UAE and the conversion of households from cylinders to piped gas were among the other steps that the government pushed for the larger run, he pointed out.
As Hormuz traffic decreased to a trickle, India was one of the few countries that continued to move its cargo, said Nageswaranm, adding that the same level of patience was used to manage the external accounts.
The government expanded securities available under law and eliminated capital gains and withholding taxes on foreign institutional purchases of government debt under the Fully Accessible Route, attracting capital into the bond market, he added.
