Expert Zone

Straight from the Specialists

The benefits of falling oil prices for India

Photo

(Any opinions expressed here are those of the author and not necessarily those of Thomson Reuters)

The fall in global oil prices couldn’t have come at a more opportune time for India. In August, oil imports dropped 15 percent year-on-year, driven primarily by a fall of $10 per barrel in prices. Brent has fallen below $100 over the past month, and could slip further. Increasing supplies from the United States and slowing demand are contributing to the weakness in prices.

This offers India several benefits. First, the scope for elimination of diesel subsidy. While the government has been steadily increasing the retail price of diesel in the domestic market, the fall in oil prices has nearly wiped off the need for subsidised support. Assuming the rupee stays stable, the government has a golden opportunity to market-link diesel prices.

Secondly, this would help tame inflation. Falling fuel prices have a direct effect on inflation, whereas indirectly they lower production costs for firms with petroleum-based primary input. Many industries such as paints and packaging are beneficiaries. While we can expect companies from these sectors to retain part of the gains, the rest will get passed on downstream and help lower inflation.

How falling crude prices affect India

Photo

(Any opinions expressed here are those of the author and not necessarily those of Thomson Reuters)

Brent crude prices have dropped below $100 a barrel, causing anxiety within the Organization of the Petroleum Exporting Countries (OPEC) and giving some relief to India and China. The market is bearish at present but the future is unpredictable.

India Markets Weekahead: Time to prune positions in an extended honeymoon

Photo

(Any opinions expressed here are those of the author and not of Thomson Reuters)

The Nifty closed at a new closing high of 7,954 amid volatility in an eventful week that started with the Supreme Court ruling that the allocation of more than 200 coal blocks over the past two decades was illegal.

With nearly 3 trillion rupees at stake, this had a direct effect on the metals and power sector. It also affected banking, which has exposure to the two sectors.

Scary oil

Photo

(The views expressed in this column are the author’s own and do not represent those of Reuters)

Today’s fragile global economy faces many risks: the risk of another flare-up of the euro zone crisis; the risk of a worse-than-expected slowdown in China; and the risk that economic recovery in the United States will fizzle (yet again). But no risk is more serious than that posed by a further spike in oil prices.

  • Editors & Key Contributors