The Economic Survey rightly indicates that we as a nation are expected to embark on a high economic growth trajectory. As a continuation, the Union Budget 2018 is a positive step towards an overall development and growth of the economy demonstrating the intent to boost investments in rural development, healthcare, education and social sectors. However, the crucial need of energy security that has a direct correlation with an increase in the economic activities seems to have been neglected in the budget. There is little action that has been taken in addressing the fundamental immediate need of the economy to attain energy security and reduce the burden of crude oil import.
This year oil prices have already indicated a constant surge and are currently trading around US$70 per barrel. This upward trajectory is ominous for countries that import crude oil. India’s behemoth energy requirement has prompted the government to set ambitious goals of self-reliance and energy security. This is in a scenario where the outlook for the inflow of foreign direct investment (FDI) into emerging markets is also cloudy. The combination of rocketing oil prices and potentially low FDI implies that going forward policymakers will have to galvanize energy markets by revitalizing domestic production and easing constraints on capital expenditure for exploration and production.
Energy security is critical to stable economic growth. And while the push to generate renewable energy is commendable and necessary, India’s oil demand dynamics will require the energy sector to fire on all cylinders. Crude oil production will remain a critical component of India’s energy mix and dependence on oil imports, particularly from the middle east, makes it vulnerable to external shocks that could destabilise economic growth in three ways. The first is possible supply disruptions, the second, the import of inflationary pressures and finally a widening current account deficit. Robust domestic production would eliminate some of these risks and contribute to the Make in India push, generating much required jobs and economic growth while enhancing energy security. Read More
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