Commodity Tip : Effect of Crude Prices in India

Indian economy is very vulnerable to crude prices and slight rate increase can also play havoc with Indian economy. The accompanying image clearly demonstrates the manner in which our economy is getting effected due to increase in crude prices in international market. As it is we can see that we are most sensitive to crude prices among all these BRICs economy and among China, Brazil and US in particular.

Thus as a nation we have to develop an alternative fuel to reduce our dependency on crude oil shaking our economy. As soon as crude price rises above $100 per barrel, our economy comes under pressure due to rising inflation and as a result RBI has to undertake tightening of CRR ratio which slows down loan disbursement as loans become costly. Stock market comes under pressure due to oil subsidy burden on Navratna companies. Due to spiralling crude prices; transportation becomes costly and thus it leads to inflation. Thus it is a vicious cycle and we need to break it to break it to become a global economy.

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