Rising crude oil and its hurdle to Indian economy

Petrol and Diesel prices both have breached the Rs. 100 mark and crude oils continue to rise with the opening of the economy, geopolitical fears, overpotential demand supply disruption or any policy stands taken by OPEC countries(Organization of the Petroleum Exporting Countries), all around the world.Officials at oil marketing companies have however noted that even current record-high prices are lower than what refiners should be charging in line with international prices and that prices are set to rise further unless there is a cut on levies on autofuels or a fall in crude oil prices. But, How could this effect the Indian economy indirectly or directly? Well let's discuss.

India being the third largest importer of crude oil spends a huge amount on crude oils buying almost 1.5 billion barrels of crude oil every year at approx which accounts to almost 85% or more of its total crude oil requirements. 

• Well I hope you might be aware that the exchange currency for buying the crude oil is US Dollar, and hence a every 10$ rise in the price of crude oil per barrel could cost a extra fiscal debt of almost 15$ billion which accounts to roughly 43 bps(basis points-a unit of measurement equal to 1/100th of 1 percent) of India's GDP. This rise in fiscal debts could negatively effect not only the economy but even the return on other financial markets as these are highly volatile to every economic impact. The fall in crude oil prices was a major contributing factor in the reduction of India’s fiscal deficit between 2014 and 2016, according to a report by Livemint . 
• The rise in the price of crude oil would also impact the value of Rupee as the requirement for the dollar currency to buy barrels would increase even the value of Indian currency would depreciate. Well, though the depreciating value could sometimes be a positive sign for exports but let's not forget that India is actually a importing oriented country though a large amount of employment opportunity come from export oriented trades.Rupee depreciation has a reverberating effect on the Indian economy and even the stock market. 
• Oil is a very important commodity and it is required to meet domestic fuel needs. And in addition to that, it is a necessary raw material used in a number of industries such as rubber, a important product for plastic manufacturing, used in alcohols, Used as a aviation fuel and many more . An increase in the price of crude oil means that would increase the cost of producing goods. This price rise would finally be passed on to consumers resulting in inflation. Experts believe that an increase of $10/barrel in crude oil prices could raise inflation by 10 basis points (0.1%).

Well with all these we can only hope for the best and a better future inspite of all predictions of gdp touching 8% or 10% or 12% and so on by various financial institutions.