This is indeed a welcome development. Probably oil has faithfully followed the old market saying that what ever goes up will ultimately come down.

In all most all non-oil producing countries, high oil prices were the main concern of their governments. With every dollar increase in oil prices, the prices of all commodities and services were going up exponentially. The common man was worst affected. This oil dependent modern economy is very much exposed to the inflationary impact due to increasing oil prices.

In free market market economies like USA, the retail market price of oil is directly related to international oil prices. But in countries like India, they are related to the administered price mechanism, where the retail price is decided by the regulators; some times, as it happened in the recent past, such countries took a major portion of the price hike on their back by providing subsidy to the consumers.

This is, of course, expected of a people minded government so that the impact of high oil prices is not fully and directly felt by the people, majority of whom, still depend upon the support of the government for their very existence and survival.

Considering this, the Government of India did the right thing many times in the past, to reduce the tax component of the oil price and pass on the resultant benefit of lower oil prices to the consumers. This reinforces the view that the Government can afford a lower tax on oil price and still it can manage its governance.

With this reinforced view, let us now look at the current oil prices. The oil prices, as mentioned earlier in this blog have fallen by about 50%.

Hence the administered prices fixed during the high oil price times legitimately needs a relook and reasonable downward revision now.

Definitely, this reduction in retail oil prices will go towards in bringing down the inflation figures in India and this will reduce the burden of the common man.

I am rather surprised why the political parties, which were making hue and cry earlier when the Government of India was looking into increasing the retail prices of oil, when the international prices were skyrocketing, were keeping quiet and not making any case for a reduction in oil prices now.

The Government of India can act smart enough now and on its own go for a reduction in retail prices of oil. This step will work definitely in their favour as it has to go before the people in the next couple of months for reelection.

Probably, one can even expect the Government of India to announce the measure before the Parliament Session which is due to start tomorrow.

Will the Government act as expected. I believe, I am not asking for moon.