Fossil fuel contributed 20% to India’s annual rate of inflation

NEW DELHI: Fossil-fuel related items — transport and household energy — contributed about 20 per cent to India’s annual rate of inflation between April and May 2022, said a report by Cambridge Econometrics. At that time, India’s annual inflation rate (CPI) was between seven and eight per cent. The report highlights that between January 2021 and August 2022, fuel and power prices rose nearly five times faster (57 per cent) than overall consumer prices in India (12 per cent). This was reflected in consumer spending.

Households in the Delhi region, for instance, are estimated to have spent 25 per cent more on fuels and electricity in 2022 than in the previous year, and nearly 50 per cent more — around Rs 4,100 than in 2020. For rural households, this was even more pronounced given their higher spending on energy as a proportion of their income.

This is despite the fact that the Indian government budgeted the equivalent of about 0.5 per cent of GDP to shield households from the full impact of global fossil fuel price hikes.

The G20 Energy Transitions Working Group discussions recently held in Bengaluru concluded on the continued usage of fossil fuels for another 15-20 years. “The cost of renewable energy has been falling steeply over the last decade. It is now a well-known fact that renewables are now much cheaper than fossil fuel-based electricity production. In fact, India is among the cheapest locations in the world for new renewable energy projects and these costs are only expected to fall further,” the report’s lead author, Carl Heinemann, said. (IANS)

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