Diesel price deregulation an early test for Modi in India

Diesel subsidies in India have burned a sizeable hole in the government’s pocket over the past few years. But the stage appears to be set for a full deregulation of diesel prices in the coming months, which would eliminate diesel subsidies once and for all. Reducing subsidy spending would be an encouraging start for Modi’s government and would suggest an appetite for broader market-friendly reforms. But equally, a failure to push through with the changes would raise concerns about the government's willingness to make the more politically difficult reforms that are needed to reinvigorate India’s economy.