Since its crude oil is $2 per barrel cheaper than the imported Dubai crude, inclusion of US for imports is a very good move for India, CARE Ratings report said. In addition, it will also help to counter the price hike arising out of geopolitical disruptions. It also helps to ensure diversity remains crude oil supply base for India, the report says. The production of crude oil in India is expected to get stability of FY 2018-19. CARE Ratings expects brent will not break the resistance of $70/bbl but will be above the support levels of $65/bbl, on a monthly basis.The inflation increases due to hike in global crude oil prices and this also reflects on the current account and fiscal deficit of the country.
On the account of 10 percent increase in price of the crude oil, wholesale price inflation (WPI) soars by 0.5-0.7 percent. Given the less weightage of oil related products in the CPI, the impact is less reflective. The global markets are witnessing rise in crude oil prices for the last three months. The Brent crude has been hovering around $68 per barrel after briefly touching $70 per barrel in mid-January. The prices of petrol and diesel have spiked by over Rs 3 per litre since October as the prices of Brent have climbed by $13 per barrel. As per the Economic Survey report, every $10 per barrel hike in crude oil price affects the GDP growth of 0.2-0.3 percentage points. The inflation gets affected by 1.7 percentage points, and Current Account Deficit (CAD) widens by $9-10 billion.
Recently, in a TV interview Finance Minister Arun Jaitley had said that the government will be very happy with crude prices anything up to about $60 per barrel or so, even if it moves up to the present level, it is a shock we are trying to absorb.