High fuel prices made people spend less on healthcare and other discretionary items.

High fuel prices made people spend less 

The consistently rising fuel prices have made a huge impact on the lives of common people. The impact can be seen in how consumers are spending their money. According to a recent report by the State Bank of India, fuel prices have led to people spending less money on other important expenses like healthcare. High fuel prices made people spend less on healthcare and other discretionary items.

SBI economic wing analyzed the card spends which indicated that the expenditure on health has been reduced in order to accommodate increased expenditure on fuel.

“In fact, other non-discretionary items, like utility services, grocery items and other such product’s demands have significantly declined.” Dr Soumya Kanti Ghosh said in a note. This trend could prove to be worrisome if it continues going forward. Apart from this she also said that “The share of non-discretionary spend on fuels has increased to 75% in June 2021 from 62% in March.”

The trend has been observed taking into consideration of a significant number of customers on a random basis across different age groups and gender and their spending were divided into discretionary and non-discretionary spends during the last few months.

It is also noticeable that this rise has come at a time when people are already dealing with a blow from Covid-19 and having to spend higher on medical expenses. People are now relying on their savings to meet their expenses, the report also concluded.

The report also stated that according to the RBI, the household financial savings rate in the third quarter of FY21 had decreased to 8.2% of GDP from 21%, and 10.4% in the previous two quarters. Their estimates also indicated that during the 2nd wave, the number of districts with deposits outflow might become out double than in the first wave,

Meanwhile, retail inflation was recorded at 6.26% in June month where fuel and light jumped to 12.68%, as diesel and petrol prices remained high. SBI has also projected that with every 10% increase in petrol prices, there will be a 50bps increase in CPI.


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