The unwelcome combination of rising oil price and a weakening rupee is giving a tough time to investors, especially when the whole world is looking towards India as a ‘growth engine’. Now the billion dollar question is: will the rally in crude oil prices continue?
Current account deficit is another concern. As per an SBI Economic Research report, Indian’s CAD could cross 2.5 per cent of GDP in FY2019 (provided oil prices continue at $80 a barrel level). Currently CAD is estimated at 1.9 per cent for 2017-18.
RBI estimates that for every $10 a barrel rise in oil price, GDP growth reduces by around 0.15 per cent. If fiscal and current deficit widen, it is going to affect macroeconomic mathematics. The strengthening of the dollar index is putting extra pressure on payment bill. In the international markets, crude prices increased by 28 per cent, while our weak currency turned crude oil 48 per cent dearer. Read more
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