Oil price & its

impact on Indian
economy
PRESENTED BY: M.HARIPRIYA
REGISTRATION NO : 2128344
Introduction
Crude oil is a naturally occurring substance found in certain rock formation in the earth.

Crude is highly flammable and can be burned to create energy.

India is the world’s third largest Oil importing nation and world’s seventh largest economy.

In the event of rising Crude prices, it is a significant loser, but in the event of declining Crude
prices, it is a major winner. The rapid growth of the economy requires the importation of more
crude oil to meet the country's industrial and home needs.

India's crude oil import bill for 2018-2019 increased dramatically in March 2018, as the country
relies on crude imports for 80% of its consumption needs.
Economic impact of rise in crude oil price

Impact on Current Account Deficit (CAD)

When the value of imported commodities exceeds the value of exported goods, the current account
deficit expands, reflecting how much money India owes to the rest of the world in foreign currency.
With India's growing demand for crude to cover its consumption demands, which has increased
from 77.3 percent in 2014 to 87.3 percent in 2018, the current account deficit is rising at a quicker
rate, inflating the country's import bill.
A widening CAD puts pressure on the rupee's value and makes it weaker against a basket of
international currencies.
 Impact on fiscal deficit

Rising crude prices have a negative impact on India's fiscal deficit, which is defined as the
difference between the government's total revenue and total expenses.

 India imports over 80% of its annual crude oil consumption, or 1.5 billion barrels per year, from
international markets.

Rising crude prices raise the government's total expenditure, which has a negative impact on the
fiscal deficit.

The fiscal deficit reveals how much money the government needs to borrow in order to satisfy its
obligations. India's economy will be harmed by a higher fiscal deficit.
 Inflation

Oil is a very Important commodity that is required on a daily basis for both home and industrial
purposes.
Oil is a crucial raw ingredient for a variety of industries. As a result, any increase in oil prices would
cause inflation in all parts of the economy, from manufacturing to transportation, which will eventually
be passed on to end users, making things exceedingly expensive.

Impact on rupees
Rising crude prices have a negative impact on the rupee, as more money leaves the system to buy
dollars in order to pay for petroleum. As a result, the Reserve Bank of India (RBI) intervenes on
occasion to prevent the rupee from falling further.
The rupee's depreciation has a negative impact on the country's economy. The rupee is at an all-time
low, putting India in jeopardy if macroeconomic indicators continue to deteriorate. The weakening rupee
is good for exporters but bad for importers.
Conclusion
Taking into account all of the above variables, rising crude prices have a negative impact on the
economy and impair its growth prospects.
 Most Indian industries require Oil for their industrial needs in order to produce their final
products, therefore a spike in crude raises their input costs and reduces profits. Thus, Oil &
Lubricants, Tyres, Paints, Plastics, Airlines, and other sectors will be badly impacted. The
profitability of these industries will be harmed when input costs rise.
THANK YOU