Finance
Macro Impact of Higher Crude Prices on India
Published on
Author: DISHA PRAFUL SUKHANI
Highlights:
- The recent surge in crude oil prices is primarily due to supply reduction announcements from key players such as Russia and Saudi Arabia.
- Nevertheless, sluggish global consumption demand is expected to counteract this supply-demand gap starting from 2024.
- Retail prices are unlikely to increase as there would be pressure on oil marketing companies (OMCs) not to hike retail petrol/ diesel prices. Thus, there would be no impact on inflation.
- The impact on fiscal balance is also expected to be minimal as OMCs will take most of the burden of higher fuel prices.
- The full-year current account deficit (CAD) will likely increase by ~ 20 basis points (bps) to 1.8% of GDP if the Indian crude basket averages ~ USD 90 per barrel for the remainder of the fiscal year.