Arvind Panagariya, a former Finance Commission chair and economist, said fuel prices in India must be allowed to rise further [1].

This proposal challenges the prevailing government strategy of shielding consumers from global oil volatility. If implemented, it could shift the burden of energy costs from the state to the end user to prevent broader economic instability during crude oil spikes.

Panagariya said the market price serves as the most effective mechanism for managing demand. "Price is the best rationing tool," he said [1]. He said that allowing petrol prices to rise is necessary to navigate the current global energy crisis and ongoing tensions in West Asia [1, 3].

According to Panagariya, the country cannot fully protect its consumers if crude oil prices experience another significant spike [1, 3]. He said that relying on blunt quantitative restrictions to manage fuel supply would be less effective than allowing the price to fluctuate based on global market conditions [1, 3].

Despite these external pressures and various economic shocks, Panagariya said that India's economy continues to grow at a rate of 7%+ [1]. He believes this growth provides a foundation for the economy to absorb the necessary adjustments in energy pricing.

"Fuel prices need to go up a bit more," Panagariya said [1]. He said that this approach is essential to protect the overall economy while managing the risks associated with the global energy market [1, 3].

“"Price is the best rationing tool."”

This perspective highlights a tension between macroeconomic stability and political viability. While economists like Panagariya argue that market-driven pricing prevents waste and protects foreign exchange reserves, fuel price hikes are often politically unpopular in India. Moving toward a floating price model would reduce government subsidies, but could increase inflation across the transport and logistics sectors.