And that is excise taxes on petroleum … which is huge.
If you look at retail price of diesel, it is equivalent to oil prices at $75-80 a barrel. The actual oil price is $50-55 a barrel, so there is a $20-25 per barrel gap between international prices and pump rates.
That is the amount of tax that the government is collecting.
If you bring that down to $55 a barrel, that is almost 40% decline in pump prices, and then you kill many birds with that one stone.
It can be populist, but the important point is it instantaneously frees up disposable income.
It also brings inflation from 4% to probably 2-3% for the next 6-9 months, which opens up space for rate cuts.
So, you get that impact multiplied by rate cuts.
This is the only stimulus that has immediate impact, affects GDP right now, frees up disposable income, allows people to spend, reduces inflation and gets multiplied through rate cuts.
Any other kind of stimulus package will either be saved or have an impact a year from now.
2 replies on “How to immediately boost the Economy”
Suggestion is good, but the concern is the respective state governments will immediately hike their local taxes to the extent of excise duty decrease… this happened in the past and hence the reluctance of the central govt to reduce excise duties.. ultimately the consumer will not see any benefit.. is there a way to ensure SG cannot raise the local taxes?
Won’t more money in peoples hand will INCREASE inflation..?