Falling oil prices may not ease inflation
NEW DELHI : Falling crude oil prices, on the back of concerns over a global slowdown and recession, are unlikely to bring down domestic inflation sharply, as the benefits of the drop are yet to be passed on to retail customers, said economists. Crude prices have fallen 24.41% in the last 12 months. However, retail prices of petrol and diesel have remained unchanged since May 2022.
According to economists, falling crude oil prices can, however, help the government on the fiscal and macroeconomic front, with the country being heavily dependent on imports to meet its energy needs. India imports 85% of its energy required. Prices of fertilizers, and gas, which too India imports heavily, are also linked to the global crude prices.
The pressure on oil prices is going to be subdued in the medium term due to recessionary trends and slowing down of economies globally, said N.R. Bhanumurthy, Vice-Chancellor of Dr. B.R.
Ambedkar School of Economics University, Bengaluru. However, this is unlikely to be passed on to retail customers, Bhanumurthy said. “Any changes in inflation in the next three to four quarters will largely be due to domestic factors," he said.
“We had almost 30% premium compared to the global oil prices (with purchasing of Russian oil). Even now, there’s $5-6 per-barrel difference. That is the reason the pressure of imports on inflation in India is less than in many other countries," he added.
During the last budget, crude oil was factored in at about $84-85/barrel for budget estimates, after the Indian basket averaged about $93 a barrel in FY23. At present, crude prices are hovering around $78-79 mark and are expected to remain at $75-80 a barrel in the current fiscal. Meanwhile, the rupee has risen 3.39% in the
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