It should be noted, however, that the most volatile food items driving inflation, fruits and vegetables, are already zero-rated. Budget 2013 also removed the fuel subsidy on premium gasoline. Again, based on the Bank’s analysis, we do not expect the reduction in the subsidy of premium gasoline to significantly impact inflation in the short term.
The higher price of premium gasoline could increase the RPI by around ½ per cent in the first round, with the impact concentrated on the users of higher-end vehicles unable to substitute to other fuels. However, as the petroleum subsidy is cut across the board over the next few years, the cost of transportation and some related goods and services will increase.