Petrol and diesel prices have not been hiked in the last four days but they are still at a multi-year high. The fuel prices in India has risen due to the international oil price rally since October last year. After a three-year-long low price windfall, the Narendra Modi government is facing oil as one of the biggest challenges. It is not only hurting common-man but also poses inflationary risks and adverse impact on the GDP growth.
“India is a net oil importer and a sustained upside risk to crude price hike will likely have adverse macroeconomic implications, specifically in terms of a negative trade shock worsening the current account deficit and the fiscal deficit,” Anis Chakravarty, Economist at Deloitte India said. A 10% increase in the fuel prices will lead to a direct increase of around 0.5% in WPI and around 0.25% in CPI.
The rise in prices is due to production cuts by both OPEC and Non-OPEC countries caused supply disruption along with unrest in some Middle Eastern countries. Read More