DMPQ: Discuss the impact of low crude oil prices on Indian economy.

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Positives:

  1. Low Import Bill
  2. Low pressure on Current account deficit.
  3. Ease in the balance of Payment.
  4. Ease of pressure on Inflation.
  5. Low price for consumer if the lower price effect pass on and High revenue for centre and states if the effect doesn’t pass on to the consumer.
  6. Money saved can be utilised for social sector capital formation.
  7. Low inflation will force RBI to cut the policy rates and hence increase in the Private investment and consumption and overall economic growth.
  8. In the long run can give a boost to automobile sector.

 

Negative:

  • It will lead to irrational use of oil and can be damaging for envt.( In case of steep decline)
  • Suddenly the projects on renewable energy will get less attention if the price remain low for long duration of time. The loan exposure to renewable can become Non performing if the low price regime persists.
  • The economies that are entirely dependent upon the oil income will see a major reduction in the earning and hence the global consumption will slow down. The import will decrease and hence less demand for Indian Products. This will lead to reduction in export earnings.
  • Congestion on road will increase will discourage the use of Public transport.

 

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