As Asia's third-largest economy recovers from the shocks of severe lockdowns to control the spread of the coronavirus, the Indian government reduced taxes on petrol and diesel on Wednesday in an effort to improve consumer sentiment. The excise duty on gasoline has been reduced by 5 rupees (USD0.0671) per litre, while the duty on diesel has been reduced by 10 rupees (USD0.1342) per litre, according to the government.

Following the federal decision, at least ten states led by Prime Minister Narendra Modi's Bharatiya Janata Party (BJP) or its allies announced late Wednesday that they would reduce local fuel taxes by as much as 7 rupees per litre. The tax break comes on the eve of Diwali, the Hindu festival that kicks off India's busy festive season, which is known for increased consumer spending.

The federal government will lose between 550 billion and 600 billion rupees (USD7.38 billion) in revenue as a result of the tax cuts, according to a government source who declined to be named because the details aren't public. Due to a decrease in the number of coronavirus cases, India's consumer spending has been steadily increasing in recent months, with restrictions on travel and business operations being eased.

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