IMPACT OF OIL PRICES IN SRIKARA SIMHA

DEPARTMENT OF MBA
INDIA’S CURRENT ACCOUNT
DEFICIT
CURRENT ACCOUNT

Balance of Trade – export minus import of goods and

services
Net factor income such as interest and dividends

CURRENT ACCOUNT DEFICIT

Association with trade deficit of a country (imports less

than exports ).
a net negative sales abroad

For developing economics ,transfer payments are

important
 • 1991 crisis is remembered as the BOP crisis
but it was essentially a twin deficit problem
• India was unable to finance it's CAD through
capital flows being a closed economy
HISTORY OF Symptoms and challenges
CAD IN INDIA • A CAD larger than the debt flows
• Fiscal deficit was at high off close to 9% with
persistently high revenue deficit
RISING CRUDE OIL PRICES , WHAT IS THE
IMPACT ON Indian ECONOMY

1. Rise in oil prices

increases India’s import 2. Increase in Fiscal 3.Increase in Current 4.GDP growth rate
bill which in turn leads deficit. Account Deficit . decreases.
to:

8. Slowdown as
profitability of industries
5.Petrol and Diesel
6. Inflation increase. 7. Air travel gets costlier. decreasing due to
prices increase.
reliance on oil in many
ways
 1. Higher Inflation
The report suggests that a 10 per cent increase in crude oil will lead to an
increase in the Wholesale Price Index (WPI) in India by nearly 0.9 per
cent. The report predicts that increasing oil price may even result in a
rate of inflation based on WPI at 12 per cent and 6 per cent for FY22 and
FY23, respectively.
There will also be a significant impact on the oil goes up by 10 per cent,
the price of the goods in India will be up by 5 per cent.
IMPACT OF
CURRENT 2. In Value Of Rupee
2

ACCOUNT Oil import accounted for nearly 27 per cent of India’s total imports in
FY19 and fell to 21 per cent in FY21. Although there has been a slight
DEFICIT rise in FY22, it is yet to get back to the mate t 10 per cent hike in oil
prices lead to an increase of India’s (CAD) by nearly $15 billion or 0.4 per
cent of GDP. This will have a negative impact on INR,” says the report.
Moreover, as the study suggests, with an average increase of 1.2 per
cent in oil prices, there will be a fall of around 0.9 per cent in the value
of the rupee.
CONCLUSION

India is the worlds largest importer of crude oil so the crude oil
prices play a very important role in the development of the
Indian economy

To reduce the current account deficit India should rely more on

the latest technology like flex engines electric vehicles and
hybrid vehicles

India also have to make strategic deals with oil importing

nations to trade oil with Indian currency instead of dollars, so
this also reduces the reliance of Indian economy based on the
dollar.
THANK YOU