Congress leader and former Finance Minister P Chidambaram has criticised what he called "excess taxation" by the government in an economy that has been badly wounded by the COVID-19 pandemic.
Mr Chidambaram, who was Finance Minister in the United Progressive Alliance government before Prime Minister Narendra Modi came to power in 2014, highlighted some solutions linked to taxes and cess, but added a caveat, "Don't ask for my advice if I am persona non grata. I give advice, don't take it. Take the advice of your own economists and see what happens."
"The rise in fuel price is not due to external factors but due to excess local taxes. The central duty exceeds the state excise duty," Mr Chidambaram told NDTV.
The wholesale price-based inflation eased marginally in June as crude oil and food items saw some softening in prices. But inflation remains in double-digit for the third consecutive month in June.
"There is inflation in pulses, transport, fuel. Petrol and diesel prices are driving inflation, so are customs duty," Mr Chidambaram said.
On what he would have done in such a situation, the former Finance Minister said, "I'd reduce cess. See, cess has become a permanent feature of the NDA (National Democratic Alliance). The import duties on essentials like palm oil and pulses should be reduced. GST (goods and services tax) rate on a large number of items need to be reduced," he said.
Mr Chidambaram agreed inflation was high during the UPA's time, but they were able to successfully control it. "Inflation was all over the place when someone else was in charge of finances. When I came in, I took collective responsibility. We did bring inflation under control in 2012-13, so there are ways to bring inflation under control," he said.
The former Finance Minister said it is not the right time to bring fuel under the GST. "All products must come under the GST eventually. But given the complete trust deficit, the states don't trust the centre... Union Finance Minister has admitted there are GST arrears which need to be paid," Mr Chidambaram said.
The Reserve Bank of India in its monetary policy last month kept interest rates unchanged at record lows and committed to maintain an accommodative policy stance to support growth. Retail inflation remained above the RBI's comfort level of 6 per cent for two straight months at 6.26 per cent in June, data released earlier this week showed.