India cuts fuel taxes to spur on economic growth

India's federal government cut excise taxes on gas and diesel, and is further urging states to cut value-added taxes on fuel

India is cutting its federal excise taxes on gasoline and diesel while urging states to reduce their respective value-added taxes on fuel in order to boost the country's economy as it reemerges from pandemic lockdowns.

The nation's Ministry of Finance announced the move on the eve of Hindu celebration Diwali, the festival of lights that marks the beginning of the country's holiday season. It is also aimed at giving relief to farmers entering the winter crop season, the government said in its statement.

India Diwali

Shoppers at a market during the Diwali festival in New Delhi, India, on Wednesday, Nov. 3, 2021. Businesses are expecting sales during Diwali -- the Hindu festival of lights -- will pick up to levels seen before the pandemic struck early last year, i (Anindito Mukherjee/Bloomberg / Getty Images)


Oil prices have surged worldwide in recent months and India, the third largest economy in Asia, is particularly vulnerable to such rises. The country is the world's largest oil importer and consumer according to Reuters, shipping in roughly 85% of its oil from other nations.

India farmers

A farmer spreads a paddy production as a chil looks on in a field in Nizamabad, some 167 km north of Hyderabad on November 3, 2021. (Photo by NOAH SEELAM / AFP) (Photo by NOAH SEELAM/AFP via Getty Images) (NOAH SEELAM/AFP)

But the pain at the pump in India is not entirely due to the global energy market.

The Indian government's move also came days after Indian Parliament member Rahul Gandhi made a speech slamming the party currently in control, saying India has among the highest fuel prices in the world due to taxes – not the price of oil.

Rahul Gandhi

Congress leader Rahul Gandhi (C) addresses the media after presenting a memorandum to President Ram Nath Kovind over the Lakhimpur Kheri incident, outside Presidential palace in New Delhi on October 13, 2021. (Photo by Prakash SINGH / AFP) (Photo by (PRAKASH SINGH/AFP / Getty Images)


The Ministry of Finance cut the excise duty on gasoline by 5 rupees ($0.0671) per liter, and on diesel by 10 rupees ($0.1342). Prior to the tax cuts, a liter of gas in the country was around 110 rupees, with 52% of that cost from taxes. The cost of diesel was at 98 rupees per liter, 47% of which was from taxes.