India raised diesel prices nearly 8 percent on Friday after months of delay, a politically unpopular move that will add to inflationary pressure but also eases the government's subsidy burden and could bolster its image among wary investors.
After a meeting that was delayed by about six hours, a government panel raised the price of diesel by 3 rupees per litre to around 41 rupees per litre. It also raised kerosene by 2 rupees per litre and LPG prices by 50 rupees per cylinder.
The increases, announced by Oil Minister S. Jaipal Reddy, were roughly in line with expectations.
"This is the only window they have for any cutting of subsidies. By the end of the year they will be in (state) election mode," political analyst Mahesh Rangarajan said.
Since it was first elected in 2004, the government of Prime Minister Manmohan Singh has more often than not refrained from pushing through tough reforms in favour of pleasing its predominantly rural voter base.