The Economic Survey 2017 has expressed concerns over the rising crude oil prices that casts an immediate impact on the economy of an oil import dependent country like India.
Noting that price of Indian basket of crude oil (comprising of the average prices of the varieties of crude oil that India imports from Oman, Dubai and Singapore Brent) has increased from $39.9 in April 2016 to $52.7 in December 2016, the Survey said rising oil prices present a challenge to India’s growth.
Oil prices are currently hovering at $54.63 per barrel on Friday.
“Some possible challenges to growth exist. For example, the prices of crude oil have started rising and are projected to increase further in the next year. Estimates suggest that oil prices could rise by as much as one-sixth over the 2016-17 level, which could have some dampening impact on the growth,” the Survey said.
“For the next financial year, the recent uptick in global commodity prices, in particular crude oil prices, pose an upside risk,” the Survey added.
The Survey said the downward spiral in international crude oil prices resulted in a decline in oil import bill by around 18 per cent which together with a sharp decline in gold imports led to a reduction in India’s overall imports. After crude oil, India is the second largest importer of gold.
“After remaining fairly stable for much of the last two years, international prices of crude oil have started to trend up. This along with rise in the prices of other commodities like coal, etc. could exert inflationary pressure and have the potential to adversely impact the trade and fiscal balances,” the survey added.
India imports around 80% of its crude oil and 18% of its natural gas requirements and any upside in oil prices disturbs its fiscal maths.