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Impact of Crude oil on Indian Economy

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 International Journal of Modern Management Sciences, 2015, 4(1): 11-26
International Journal of Modern Management Sciences ISSN: 2168-5479
Journal homepage:www.ModernScientificPress.com/Journals/IJMGMTS.aspx Florida, USA
Article

Impact of Crude oil on Indian Economy

Firdous A Wani*, Mudasir M Kirmani, Syed Mohsin Saif

Maulana Azad National Urdu University, Hyderabad, India.

* Author to whom correspondence should be addressed; Email: firdouswani42@gmail.com

Article history: Received 14 September 2015, Received in revised form 25 October 2015, Accepted 6
November 2015, Published 8 November 2015.

Abstract: The requirement of crude oil has been increasing at a rapid pace which has made
India dependent on crude oil imports. The basic price of crude oil is always lesser the import
taxes make it more costly for a common man. The price of petrol or other related products
increases accordingly which results in increase in expenditure of a common man. This paper
given an insight into the present state of crude oil imports and an attempt has been made to
explain the importance of reducing the crude oil imports in order to improve the living
standards of a common man.

Keywords: Crude oil, oil imports, petroleum products.

1. Introduction

LOUCKS, Describes an economic system is a system of those institutions which a given nation
or group of nations has chosen or accepted as the means through which there resources are utilized for
the satisfaction of human requirements. Therefore, Business can’t be analyzed and understood properly
without reference to the economic within which business activities are carried out.
Business fortunes & strategies are influenced by the economic characteristic and dimensions of
economic policies. The stage of development of economy, economic resource, the level of income, the
distribution of income and assets, global economic linkages, economic policies etc, has direct
implications for any business enterprise. The nature and size of demand and government policies have
very high impact on business process in general and industry in particular.

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Int. J. Modern Mgmt. Sci. 2015, 4(1): 11-26 12

2. Indian Economy

India has undergone a paradigm shift owing to its competitive stand in the world. The Indian
economy is on a robust growth trajectory and boasts of a stable annual growth rate, rising foreign
exchange reserves and booming capital markets among others. The Economy of India is the seventh-
largest in the world by nominal GDP and the third-largest by purchasing power parity (PPP). The
country is one of the G-20 major economies, a member of BRICS and a developing economy among the
top 20 global traders According to the world trade organization. According to the Ministry of Finance
Government of India the annual growth rate of Indian economy is projected to have increased to 7.4%
in fiscal year 2014-15 as compared with 6.9% in the fiscal year 2013-14. In the annual report, IMF-
forecast, the Indian Economy would grow by 7.5% percent in the 2015-16 fiscal years starting on April
1, 2015, up from 7.2% (2014–15). India was the 19th-largest merchandise and the 6th largest services
exporter in the world in 2013; it imported a total of $616.7 billion worth of merchandise and services in
2013 as 12th-largest merchandise and 7th largest services importer. The agricultural sector is the largest
employer in India's economy but contributes a declining share of its GDP (13.7% in 2012-13).

3. Sectors of Indian Economy

3.1. Agriculture

In farm output, India ranks second in the world. In 2007, agriculture & forestry, logging & fishing
compromised 16.6% of the GDP which employed 60% of the population. Though its share of the GDP
has declined, it is still the largest economic sector and plays a major role in the socio-economic
development of the country. The country is the world’s largest producer of tea, turmeric, black-pepper,
ginger, milk and cashew nuts. It is also the second largest producer of wheat, rice, groundnut, sugar, and
inland fish. Around 10% of the world’s fruit production is from India with the highest production of
bananas, mangoes and sapotas (2008, EST.). India is the world’s largest silk consumer and the second
in producing silk.

3.2. Industry and Service

27.6% of the GDP comprises of industry which employs 17% of the population (2007 EST.).
Around one-third of industrial labour works in simple household manufacturing processes. With
economic reforms, foreign competitions, privatization of public sector industries, the production of fast
moving consumer goods has increased. An Indian private sector which was run by old family-run
business needed political connections and biases for survival are getting challenged with foreign
competition and cheaper Chinese import. These firms have revamped their management and have

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Int. J. Modern Mgmt. Sci. 2015, 4(1): 11-26 13

designed new products, relied on lower labor costs and innovative technology to handle these threats in
order to mitigate the impact of these threats by leveraging from their corresponding strengths.
After Agriculture, textile manufacturing has the second largest employment and comprises 26%
of manufacturing output, with 23% of the population in the service sector; it had a growth rate of 7.5%
in 1991-2000. It accounted for 55% of the GDP in 2007.
One of the fastest sector is business industry service which includes IT-enabled services, BPO in
2000, it was third of total output services. Around 7% of the GDP in 2008 was contributed by IT
industries, seven Indian firms were among the world’s top 15 technology outsourcing companies in
2009. The annual revenue from outsourcing operation operations amounted to US$60 billion in the
March 2009. As of 2008, organized retail like supermarkets was 4% of the market. According to
Planning Commission, Government of India, Updated 8th July 2015, India’s GDP composition in 2014
are as fallows; Agriculture (17.9%), industry (24.2%), and service (57.9%) at previous GDP composition
of Agriculture and allied, Industry and service sector was 51.81%, 14.16%, 33.5% respectively at current
prices in 1950-51. Share of Agriculture and allied sector has declined at 18.20% in 2013-2014. Share of
service sector has improved to 53.03% and share of industry sector has also increased to 24.77%.
Tourism in India is economically very important and growing rapidly. The world Travel &
Tourism council calculated that the Tourism generates 6.4 trillion or 6.6% of the nation’s GDP in 2012.
Tourism supports 39.5 million jobs, 7.7% of its total employment. The Travel & Tourism
competitiveness report 2013 rank India 65Th out of 144 countries overall. The report ranks of the price
competitiveness of India’s Tourism sector 20th out of 144 countries.

3.3. Banking and Finance

The Indian money market is divided into the organized sector and unorganized sector. The
organized sector includes private, public and foreign owned commercial banks and cooperative banks
known as scheduled banks. The unorganized sector includes individuals or family bankers, money lender
and non-banking financial companies (NBFCs).
In 1969, 14 banks were nationalized by former Prime Minister Late Indra Gandhi and six banks
were nationalized in 1980. It is mandatory that bank provide 40% of their credit to important sectors like
agriculture, retail trade, small scale industry, small businesses etc. in 2003, there were 98910 bank
branches. Around 75% of the banking industry’s total assets are held by public sector banks, 18.2% are
held by private banks and 6.5% are held by foreign banks (2007 EST.).

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Int. J. Modern Mgmt. Sci. 2015, 4(1): 11-26 14

3.4. Global Trade Relations

The economy of India is dependent on its large internal market. Around 1.45% of global
merchandise trade and 2.8% of global commercial services exports was done by India. The country’s
economy was protected from the world markets till the liberalization of 1991. Foreign trade includes
export taxes, imports tariffs and restrictions. There were restrictions on FDI for the first year after
independence; exports were sluggish. Most of the imports were equipment, were materials, machinery
as there was less industrialization. Imports in the same period consisted predominantly of machinery,
equipment and raw materials, due to growing industrialization. In 2003-04, India’s international trade
was 63,080,109 crores. Since 1947, India has been the founding member of General Agreement on
Tariffs and Trade (GATT) which is now succeeded by World Trade organization (WTO).

3.5. Foreign Direct Investment in India

FDI was introduced in 1991 under FEMA Act driven by then Former Finance Manmohan Singh.
India imposes cap on equity holding by foreign investors in various sectors, current FDI in aviation and
insurance sector is limited to a maximum of 49%, Telecom raised to 100% from 74%, Defense
production is 26%, Tea Plantation up to 49%, Up to 100% FDI is allowed in the construction business.
No decision is taken on FDI cap in Airports, Media, Brownfield Parma & multi brand Retail. The Indian
economic system is the fourth –largest economy in the world in Power Purchasing Parity (PPP), terms.
Therefore it is one of the most preferred destinations for Foreign Direct Investment (FDI). FDI in India
decreased to 1749 USD million in June from 3509 USD million in May of 2015. FDI in India averaged
1078.98 USD million from 1995 until 2015, reaching on all time high of 5670 USD million in February
2008 and a record low of 60 USD million in February 2014. FDI in India is reported by Reserve Bank
of India.

3.6. Currency

The only legal tender accepted in the country is the Indian Rupee. As of 1September 2009, the
exchange rate was 49, 0003 Rupees to the US dollar, 77.60 to a UK Pounded and77.60 to a UK Pound.
The currency is also a legal tender in neighboring countries of Nepal and Bhutan. The rupee is divided
into 100 paise with the 1000 rupee note as the highest-denomination banknote and 25 paise coin the
lowest-denomination coin. The Reserve Bank of India (RBI) was established on April 1, 1935. It is the
country central bank, regulates and supervises the financial system, issues currencies and manages
exchange control. The bank is headed by a governor appointed by the Central government and governed
by a central board.

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Int. J. Modern Mgmt. Sci. 2015, 4(1): 11-26 15

3.7. Natural Resources

Table 1 listed the natural resources of India. Around 56.78% of the total land area or 1,269,219
square kilometers are cultivable. The water surface area is of 314,400 square kilometers. Around 92%
of water is utilized for irrigation. The country had the third largest fishing industry in the world in 2008.
Major minerals resources include manganese, bauxite, mica, limestone, chromites etc. India has 92
billion tons of coal reserves which is 10% of the world’s coal reserves. The country has 11 billion barrels
of oil reserves. It also has 25% of world’s thorium reserves. There are also various types of renewable
source of energy available like solar, wind and biofuels.
Natural resources are useful raw materials that we get from the Earth. They occur naturally,
which means that humans cannot make natural resources. Instead, we use and modify natural resources
in ways that are beneficial to us. The materials used in human-made objects are natural resources. Natural
resources are materials provided by the Earth that humans can use to make more complex (human-made)
products.

Table 1. Natural Resources

Air Wind energy, trees

Animals Foods (Milk, Cheese, Steak, Bacon) and clothing
(Wool Sweaters, Silk Shirts, Leather belts)

Coal Electricity
Minerals Coins, Wire, Steel, Aluminum cans, Jewelry
Natural Gas Electricity, Heating
Oil Electricity, Fuel for Cars and Airplanes, Plastic
Plants Wood, Paper, Cotton clothing, Fruits, Vegetables

4. Oil Reserves and Refining Sector in India

The refinery section info is listed in table 2. India has about 125 million metric tons of proven oil
reserves as April 2010 or 5.62 billion barrels as per United States Energy Information Administration
(US EIA) estimate for 2009. India has 47 trillion cubic feet of natural gas reserves in 2014.

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Int. J. Modern Mgmt. Sci. 2015, 4(1): 11-26 16

Table 2: Indian Refinery Sector

Refinery location Name of Company Crude oil capacity (1000

barrels/ day
Barnai, Bihar Indian oil corporation Ltd. 120
Bongaigon, Assam Indian oil corporation Ltd. 47
Digboi, Assam Indian oil corporation ltd 13
Guwahati , Assam Indian oil corporation ltd 20
Haldai , West Benagl Indian oil corporation ltd 151
Koyali, Gujrat Indian oil corporation ltd 275
Mathura , UP Indian oil corporation ltd 160
Panipat , Haryana Indian oil corporation ltd 301
Mahul , Mumbai Hindustan Petroleum corporation Ltd. 131
Vishakhapatnam ,AP Hindustan Petroleum corporation Ltd 166
Mahul , Mumbai Bharat petroleum corp.Ltd 241
Kochi, Kerala Bharat petroleum corp.Ltd 191
Manali, Chennai Chennai petroleum corp. Ltd 211
Nagapattinam , Tamil Chennai petroleum corp. Ltd 20
Nadu
Mangalore, Karnataka Mangalore refinery ltd. 302
Namaligarh, Assam Namaligarh refinery ltd. 60
Tatipaka , AP ONGC Ltd. 1
Joint Venture
Bina, MP Bharat-Oman refinery ltd. 120
Bathinda, Punjab HPCL-Mittal Energy Ltd.
180 180
Private Sector
Jamnagar, Reliance Industry Ltd. 660
SEZ, Jamnagar Reliance Industry ltd. 580
Vadinar, Gujarat Essar oil Ltd. 405
Total 4351
Source: U.S Energy Information Administration, Ministry of Petroleum & Natural Gas Government of India, Journal, FGE.

5. Indian Crude Oil Production by Region

According to Oil & Gas Journal (OGJ) India held nearly 5.7 billion barrels of proved oil reserves
at the beginning of 2014. About 44% of reserves are onshore resources, while 56% are offshore. Most
reserves are found in the western part of India (Fig. 1), particularly in the north eastern part of the

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Int. J. Modern Mgmt. Sci. 2015, 4(1): 11-26 17

country. It is also an important oil producing region and contains more than 23% of the country’s
reserves and 12% of the production.

12% 3%

offshore
48%
24% gujrat
rajastan
assam
13%
others

Figure 1. India crude oil production by region

(Source: U.S Energy Information Administration, Ministry of Petroleum and Natural Gas, Govt. of India)

6. Import of Crude Oil

During the year 2013-14 the import of crude oil was 189.238 MMT valued at Rs. 8,64,875 crore
as against 184.795 MMT production in 2012-13 valued at Rs 7,84,652. An increase of about 2.40% in
quantity terms and 10.22% in value terms has been observing during the year 2013-14 over 2012-13.
The average international crude oil price was US$107.97/bbl. In 2012-13.average price of international
crude oil during 2013-14 was lower by 2.27% as compared to previous year 2012-13. The trend in growth
of crude oil imports and crude oil international prices is shown in Table 3 and fig. 2, and 3.
Table 3. International Oil Prices
Import of %Growth Average %growth in
Year crude oil in import crude oil average
MMT of crude prices crude oil
oil (US$/bbl.) prices
2009-10 159.259 19.95 69.760 -16.53
2010-11 163.595 2.72 85.090 21.98
2011-12 171.729 4.97 111.890 31.50
2012-13 184.795 7.61 107.970 -3.50
2013-14* 189.238 2.40 105.520 -2.27
Source: Ministry of Petroleum and Natural Gas Govt. of Economics & statistics division New Delhi 2013-14.

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Int. J. Modern Mgmt. Sci. 2015, 4(1): 11-26 18

Average change in GDP

10
9
8
7
6
5
Average change in GDP
4
3
2
1
0
1973- 1998- 2002- 2004- 2008-
1974 1999 2003 2008 2009

Figure 2. Percentage growth in Average crude oil Prices

80

70

60

50
Change in crude oil
40
average change in crude oil
30
change in real GDP
20

10

0
1973- 1998- 2002- 2004- 2008-
1974 1999 2003 2008 2009

Figure 3. Import of Crude Oil

6.1. India Petroleum and Other Liquids Imported

India is a significant importer of crude oil as the country’s demand and growth continues to strip
domestic supply growth. The Middle East is the major source of crude oil importer to India, although
the western hemisphere’s share has risen in recent years. India has increased its total net oil imports from
42% of demand in 1990 to an estimated 72% of demand in 2013.India crude oil imports reached nearly

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Int. J. Modern Mgmt. Sci. 2015, 4(1): 11-26 19

3.9 million barrels/ day in 2014. According to Global Trade Atlas, Saudi Arabia is the India’s largest oil
supplier with a 20% of share of crude oil imports (fig. 4). Total 62% of India’s imported crude oil from
Middle East countries. The second largest source of imports is the western hemisphere 19% with
majority of crude oil from Venezuela 12%. Africa contributed 16% of India’s crude oil imports.

saudi arabia
7% 20%
8% iraq
iran
22% 14%
vanazula
nigeria
6%
8%
12% other middle east
other africa
western hemisphere

Figure 4. Import of Crude Oil in different countries

(Source: U.S Energy Information Administration – Global Trade Atlas)

7. Production and consumption of petroleum products

Production of petroleum products from Indian refineries has gone up from 217.736 MMT in
2012-13 to 220.756 MMT in 2013-14 i.e. higher by 1.39% as compared to previous year 2012-13 (table
4, figs. 5 and 6). During the year keeping pace with the economic growth trend, the consumption of
petroleum products in India has grown by only 0.73% and rose to 158.197MMT during 2013-14.
Consumption of LPG increased by 4.71%, petroleum coke increased by 14.96% in 2013-14.

Table 4. Production and consumption of petroleum products

Year Production % Growth in Consumption % Growth in

(MMT) production (MMT) consumption
2009-10 184.608 18.99 137.808 3.15
2010-11 194.821 5.53 141.040 2.35
2011-12 203.202 4.30 148.132 5.03
2012-13 217.736 7.15 157.057 6.02
2013-14* 220.756 1.39 158.197 0.73
Source: Ministry of Petroleum and Natural Gas Govt. of Economics & statistics division New Delhi 2013-14.

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Int. J. Modern Mgmt. Sci. 2015, 4(1): 11-26 20

80

70

60

50

Change in crude oil

40
average change in crude oil
30
change in real GDP
20

10

0
1973- 1998- 2002- 2004- 2008-
1974 1999 2003 2008 2009

Figure 5. Production of petroleum products in MMT

Average change in GDP

10

4 Average change in GDP

0
1973- 1998- 2002- 2004- 2008-
1974 1999 2003 2008 2009

Figure 6. Percentage Growth in Consumption

8. Introduction of Impact of Crude Oil on Indian Economy

The recent rise in the price of the crude oil has drawn every one’s attention towards the crucial
role that oil plays in the economy of any nation. Crude oil is one of the most necessitated commodities
in the world and India imports around 100 million tons of crude oil and other petroleum products. This
in turn, results in spending huge amount of foreign exchange. The increasing quantum of import of
petroleum products has a significant impact on Indian economy. Especially when crude oil prices are
shooting globally. Crude oil not only serves as a source of energy, but also a major raw material to
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Int. J. Modern Mgmt. Sci. 2015, 4(1): 11-26 21

various industries. It has been usually observed that in India the pricing scheme is designed in such a
way that it offers a system to moderate the soaring international prices and thereby has direct impact on
growth inflation.
According to a RBI Report (2005), for every unit of Dollar increases in crude oil price, wholesale
price (WPI) inflation rises by 30 basis points (Kaushik Bhattacharya etal.2005) analyzed the impact of
increase in oil price of inflation. They studied the mechanism of increase in the prices of petroleum
products on the prices of other commodities and the output in India. In February 1999, from an all time
low of 11 US$ per Barrel. The price increased the peak of $35per barrel in the first week of September
2000. Due to this all importing countries faced the threat of oil shock. India, being a major oil importer
was directly affected by the price rise. According to Bruno (1982), oil price shocks lead to increases in
wages and prices and decrease in real output.

8.1. Economic Background of India

With its 1 billion inhabitants the main sectors of the Indian economy are village Farming, Modern
Agriculture, Handicrafts, diversified manufacturing industries and the service sector. India has
capitalized on its large educated population to become a major exporter of IT service & software
workers. Thus services are the major source of economic growth, Accounting for 53.4% of GDP with
only one Third of labour force. India was affected far less by the global economic downturn than were
many other nations of the world. India’s GDP grew up about 6.8% in 2008&2009. In 2010 the Indian
economy rebounded robustly from the global financial crises. The combined effect of the weak 2009
monsoon and inefficiencies in the government distribution system. Fueled inflation towards peak value
at 11% in the first half of 2010. After gradually decrease at a single digit in 2010 New Delhi reduced
subsidies for fuel to lower the government deficit. The government of India seeks to reduce its deficit to
5.5% of GDP in fiscal year 2010-2011 down from 6.8% in the previous fiscal year. However, as oil
importer country, an increase in oil price can damage the social India policy and increase public deficit.

8.2. Crude Oil

A mixture of hydrocarbon that exists in liquid phase is natural. Underground reservoirs and
remain liquid at atmospheric pressure after passing through surface separating facilities, depending upon
the characteristics of crude oil stream. It may also include:
a) Small amount of hydrocarbons that exists in gaseous phase in natural underground reservoirs but
are liquid at atmospheric pressure after being recovered from oil well gas in lease separators and
subsequently comingled with the crude oil stream without being separately measure.
b) Small amount of non-hydrocarbons produce with oil, such as sulpher and various metals.

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Int. J. Modern Mgmt. Sci. 2015, 4(1): 11-26 22

c) Drip gases and liquid hydrocarbons produce from tar sands, gallstone, and oil shale, liquid produce
at natural gas processing plants are excluded. Crude propane and butane and many other products
used for the energy of chemical content.

8.3. Background for Crude Oil Prices in Indian Economy

Global crude oil price moved between $10 and $20 a barrel between 1947-1972 (table 5). There
was a jump from $15 to $42 a barrel in 1973-1974, after that India GDP growth also jumped to 4.6%
from 0.3% decline the previous years, similarly crude oil declined 40% to less than $12 a barrel in 1998-
1999. When OPEC announced a quota increase amid showing Asian economies. India’s GDP growth
also slumped to an average of 5.5% in 1999from 8% previous year. Again crude price declined 18% in
2002-2003 and India’s GDP growth also remained a modest 4%. A year later 2004,GDP growth jumped
8% when crude price starting rising in2004-2008,crude oil jumped again from $27 a barrel to over $98,
due to multiple factors-Iraq War, growth of Asian economies and weaker dollar India’s GDP growth
rose from 8%to 9.3%. During the financial crises of 2008-2009 crude rates slumped sharply from $98 a
barrel to $50 a barrel and Indian’s GDP growth came down to 6.7% in 2009 from 9.3 the year before
(fig. 7).
According to Dhananjay Sintia, head of institutional Research at EMKAY Global Financial
services, “positive correlation exists between not only crude oil price and GDP growth but corporate
earning too. Recent crude price decline have been triggered by growth concern in Europe, Japan and
china’s causality runs from the growth to commodity prices. Second, there has been decline of more than
100% in the demand & supply ratio of crude oil at that time.

Table 5. Oil rate over the years

Change in Crude Average change Change in Average change

Period
oil in Crude oil Real GDP in GDP
$15 to $42 $28.5 -0.3 to 4.6 2.45
1973-1974
$20 to $12 $16 8 to 5.5 6.75
1998-1999
$32 to $25 $28.5 5.4 to 3.9 4.65
2002-2003
$27 to $98 $62.5 8 to 9.3 8.65
2004-2008
$98 to $50 $74 9.3 to 6.7 8.00
2008-2009
Source: Economic Survey.

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Int. J. Modern Mgmt. Sci. 2015, 4(1): 11-26 23

$80.00

$70.00

$60.00

$50.00
Average change in Crude oil
$40.00 $28.50
Average change in GDP $2.45
$30.00

$20.00

$10.00

$-
1998-1999 2002-2003 2004-2008 2008-2009

Figure 7. Crude Oil Price over the Years in $/barrel and GDP growth in percentage over previous years
(Source: Economic Survey)

9. Crude Oil and India

Crude oil production in India recorded a growth of 10.33% in January 2009, as compared with
previous year 9.8%. According to officially declared figures, crude oil production reached at 11.9%
during April 2010-2011. Against a negative 0.1% growth absorbed during the same period of year 2009-
2010. Petroleum refinery production has showed a growth of 8.7% in January 2011 as compared to
previous year growth of 3.8 % in January. The growth rate of petroleum was 2.3% during April-January
2010-2011 against a negative growth of 0.5%.during the comparable period of the previous financial
year (2009-10). Core sector industrial output in the country also show’s growth trend and recorded a
higher growth rate of 7.1% in January 2011aginst the 5.3% growth recorded in December 2010.
The 6 core sector industries comprising crude oil, petroleum refinery, coal, electricity, cement
and steel have grown at a very good pace 9.8% in January 2013 during April-January 2010-2011. The 6
core industries registered a growth of 5.6 % against 5.5% during the correspondence period of previous
year.
The data (fig. 8) shows trend the period of crude oil over the given period of time. The crude oil
price was highest in 2011-2012 at $111.6 a barrel. In year 2012-2013 the crude oil price has down at
4.2% price value. Crude oil price was $69.8 against the previous year price of $83.6 in the year 2008-
2009. In the year 2012-2013 price was at $106.9 at current price is decreased to $98.7 (2013-2014). On
the May of 2013, the price of crude oil was $101.37. The International crude oil price of Indian basket
computed/published by PPAC (petroleum planning and analysis cell). Under the Ministry of Petroleum
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Int. J. Modern Mgmt. Sci. 2015, 4(1): 11-26 24

and Natural Gas declined US$100.85 a barrel on 13 May2013. This was lower than the price of
US$101.37 a barrel on the previous trading day on 10 October2013 and the price of crude oil on 8
November 2013 was 102.96$.(2013-2014). The price of crude oil in India basket was US$101.07 a barrel
on 28 August 2014(2014-2015). This was lower than the price of US$102.96 a barrel on previous
Trading day of 08 November 2013.

120 111.6
106.9
102.96 101.07
100
83.6 85.1
80 69.8

60

40

20

0
2008-09 2009-10 2010-11 2011-12 2012-13 2013-2014 2014-2015

Figure 8. Rate of Crude Oil (Source: RBI (Economic Times))

10. Conclusions

The crude oil prices all across the globe have a significant impact on global economies directly
or indirectly. However, the increase in the crude oil prices results in increase in almost all the consumable
and non-consumable commodities. Any positive change in the crude oil price has negative impact on the
increment in GDP of a country. The Indian economy is not an exception to the impact of change in crude
oil prices. In India the demand for petroleum related products is increasing at a rapid pace which results
in increase in crude oil imports. In case of any increase in crude oil prices a shock or impulse is visible
which paves way for strengthening energy efficient mechanisms in order to reduce the dependency on
petroleum products.

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