Impact of High Prices of Petroleum Products in India

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  • Petroleum/Crude prices have been continuously on the rise for the last two month and has reached highest in the last 2 years.
  • Created shortage by the gulf/OPEC countries has brought this situation, that Petroleum/Crude are 18% higher.
  • The reason of this high rise is that Gulf /OPEC countries have gone for cut in production of Petroleum/Crude whereas US has slowed down pick up from Gulf/OPEC.
  • This would have an adverse impact on Indian Economy by increasing the import oil bill by 20% which in turn would affect balance of payment resulting in current account deficit inflated by 0.8% of GDP.
  • If the Government goes for reduction in excise duty on crude oil, which was increased during the lower oil prices, it would also impact GDP by 0.8% for every rupee per litre.
  • Growth of the country has both direct and indirect effect by increase in oil prices which will surge inflation and shrinkage of Indian currency value.
  • Price rise becomes inevitable if Petroleum/Crude prices rise.
  • Government’s budget shall be adversely affected due to rise in prices of Petroleum/Crude oil which shall result in destabilizing of fiscal deficit.

Though Indian Government has no command in price rise of Petroleum/Crude oil, yet India can increase its Petroleum/Crude production to contain the adverse effects of price rise of Petroleum/Crude oil.

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