Cambridge Econometrics 3 Fossil fuel prices and inflation in India Energy prices and inflation in India The world is experiencing a surge in the cost of living and corresponding inflation levels, mostly attributed to supply-side factors. [...] In 2016, the government also introduced a scheme to promote the use of LPG (Liquefied Petroleum Gas) as a clean cooking fuel for poor households in rural areas, with the aim to reduce the use of fire wood and other biomass (Government of India - Ministry of Petroleum & Natural Gas, 2022b). [...] On top of that, the Government froze retail petrol and diesel prices, and cut VAT and excise duties on diesel and petrol to mitigate Cambridge Econometrics 5 Fossil fuel prices and inflation in India the risk of excessive losses for distribution companies as a result of the price freeze (ibid.). [...] Despite the expansion of renewable electricity generation in absolute terms (primary wind, up nearly 60% since 2015, and solar PV, now seven times more than in 2015), its share in the electricity mix has barely changed over the past four years, and actually slightly declined in 2021 and the first half of 2022. [...] In April, ‘Fuel and Light’ to India’s recent and ‘Transport and Communication’ contributed 1.7 percentage points of the inflation 7.4% annual rate of inflation, and 1.5 percentage points of the 7.0% annual inflation rate recorded in May.