While the price adjustment in the petroleum sector may add to headline inflation in the near-term, the improved fiscal situation would be congenial to both inflation and growth in the medium run, the Reserve Bank of India (RBI) said in a statement today.
The fiscal consolidation plans programmed in the Union Budget for 2010-11 will benefit from the larger than expected mobilisation from 3G/ Broadband Wireless Access (BWA) spectrum auctions, which together represent 1 per cent point of GDP, the central bank said.
The partial deregulation/upward revision to the prices of petroleum products in June 2010 will contain pressure on the fiscal situation from under-recoveries of the public sector oil companies, it added.