That’s because India is one of the largest importers of crude oil in the world. India, the third biggest oil importer and consumer imports for more than 85 percent of its crude oil requirements. Any rise in global crude prices directly impacts India in many ways so, let’s understand the effects of rising crude oil prices on the Indian Economy:
Inflation: Crude is widely used as a source of energy and is used in number of industries as energy. An increase in crude prices would increase the cost of production of goods which would finally be passed on to the final consumers, therefore resulting in Inflation.
Impact on stock market: The increased cost of production of goods due to increase in fuel prices hurts profitability of many industries, therefore leading a negative impact on the stock market.
Fiscal Deficit: Increase in prices of crude oil puts immense pressure on our import bills as fulfils more than 85% of its crude oil requirements by import. Back in 2014 and 2016, the major reason of reduction in India’s fiscal deficit was fall in the crude prices. If oil prices goes up consistently it will have an adverse impact on India’s fiscal deficit