In an exclusive interview with ANI, Gopinath said the limited increase in retail fuel prices by the Indian government, despite a sharp rise in international crude oil prices, has effectively acted as an implicit subsidy for households and businesses.
“The government is already to some extent supporting the economy because it has not let prices at the fuel pump go up by as much as one would expect it to given how much world oil prices have risen,” she said.
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According to Gopinath, the pass-through of higher global oil prices to domestic fuel prices has been much lower in India than in many other countries.
“So that itself is like an implicit subsidy to households and companies,” she added.
Responding to a question on what more the government could do to ease the financial burden arising from the West Asia crisis, Gopinath suggested that targeted support would be more effective than broad-based fuel subsidies.She said that while some increase in fuel prices may need to be passed on to consumers, support measures should be focused on vulnerable sections of society and businesses that are most affected by higher costs.
“What probably will be called for is to let more of the price increase pass through, but then have much more targeted support to vulnerable households and companies as opposed to broad-based support in terms of fuel prices artificially low,” she said.
Gopinath noted that targeted assistance would help provide relief where it is needed most while avoiding broader distortions in the economy.
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“So I think that at this current moment, providing more targeted support is a good way to go,” she added.
Her comments come as India, like many other countries, continues to monitor the economic impact of the West Asia crisis, including higher energy costs and disruptions affecting global supply chains.
Gopinath’s remarks suggest that while the government has already provided support by limiting fuel price increases, future policy efforts may need to focus more on targeted assistance and structural reforms to help the economy navigate ongoing global challenges.